So relax, keep “some” cash available but keep the rest in the bank, you’ll get it back some time lol

So relax, keep “some” cash available but keep the rest in the bank, you’ll get it back some time lol

I seen times like this before, with rates well below what they were prior, I managed to ride it through than and guess I’ll do the same now, from what I experienced in the past, when this snail starts back up, there will be a brief time to lock in long term again, as it will also again slow as usual.

The way I see things I think Ben and the boys are doin their damnedest to “make” anybody with any savings spend it by making it so damned hard to save it now, while BS’ing everybody into believing they’re getting some sort of great “non-Inflation” price for what they wana sell you, yeah right. My bills haven’t fallen per the inflation, my food cost and energy costs are just as high or higher than last year. I don’t buy 10 tons of steel a week which may be what they are talkin bout, to dump in the back yard.

I’ll truck along as I always have, its worked for me, but it is hard when a good rate CD comes due now and swallow when the bank grins at you and asks you what you wana do now.

To speak directly to your question concerning the Treasuries-

Treasuries are an important part of the world debt market. This is primarily because Treasuries, even now, are considered “risk free” meaning you are 100% guaranteed to get your money plus the stated interest rate at the end of the term. As long as they are considered risk free, Treasury interest rates should always be lower than any debt you can buy. Keep in mind, CD’s are actually a form of debt for banks. You’re lending the bank the money. So basically, if Treasury interest rates are going up, CD rates will tend to follow that trend. If Treasury interest rates are going down, CD rates will also follow that trend.

I think you might be a little confused on some of the language commentators use (and misuse) when speaking about Treasuries. For all bonds, including Treasuries, there is a face value, a bond price, and a coupon price. The face value is the amount of money you will receive at the end of the term of the bond. The bond price is set by the market, and it might be above or below the face value, depending on what interest rates have done since the bond was first created. The coupon price is the interest rate that you are paid until the maturity of the bond. I’ll spare you some time with my own explanation and point you to here to check out the mathmatical explanation. Basically, when bond prices rise, interest rates on those bonds fall. When bond prices fall, interest rates on those bonds rise. I think this might be what you have in mind when you talk about the inverse relationship.

To sum it up: If Treasury interest rates rise, CD interest rates will also rise. If Treasury interest rates fall, CD interest rates will also fall. The key is to hone in on what the interest rates are, which can be very confusing to follow at times.

I’m not sure what the deal is here, cause I heard if one is higher the other is lower and visa vrsa.

There used to be much more emphasis on Savings and Loans being distinct from Commercial Banks. S&L’s typically funded mortgage obligations with terms of 15-30 years with deposits that were typically longer-maturities. This allowed them to match maturities and stabalize net interest margin more effectively. The most crucial reason for this long term funding on the deposit side was so that there was no liquidity crisis- i.e. they didn’t have very short term deposits funding very long term mortgages.

Now, what “commercial bankers” typically do is more short term funding on the deposit side to fund much more short term loans. When you start getting out to three and five years on the deposit side, you start having a very very difficult time managing your net interest margin effectively, since your loans generally have maturities far shorter than that. For any banker with half a brain, though, as your comment expressly states, this is the exact time to bet some of your capital on a long term inflation hedge. In banking that hedge is absolutely straightforward- you lock in long term deposits and allow your assets (loans) to reprice much more quickly. This maximizes the spread.

To answer your question more directly though, the reason why a lot of (community) bankers won’t take advantage of this is because they simply are too conservative or not sophisticated enough to get out into these longer term deposit maturities. The treasury yields pretty much dictate what the yield curve is, so it’s not hard to price these things at market rates, but it’s the risk involved in locking yourself in for that long without being able to project what your assets will look like that scares people.

Great analogy of the situation. It is easy for Congress to sit back and critize the people on the front lines making the tough decisions, however it is a good thing they were sitting back or we would be in a lot worse shape then BOA owing the taxpayers and diluting the shareholders in the short-term.