Over the last two days, we have seen the 10 and the 30-Year US Treasury rates move higher. The financial media is saying they “spiked” but the 10-year US Treasury is now at 3.20% (from 3.00%) and the 30-year US Treasury is now at 3.45% (from 3.15%) that I don’t think represents a spike.

I have been saying for some time that we will see much higher interest rates in the US. I first warned against all fixed-rate bond holdings in September 2017 when the 10-year US Treasury was at 2.10%, see this article). You should to continue to avoid bonds, except those that have escalation clauses or those that otherwise produce more interest as long-term bonds rise.

Those who read the BestCashCow newsletters will note that I have strongly encouraged depositors to buy short-term CDs (one year or less) over long term CDs, and expressed a preference for savings and money market accounts over CDs.

CDs at well-recognized online banks provide not only guaranteed income over the life of the CD, but usually allow for early withdrawal with the payment of a penalty (often, the right to allow early redemption even with the payment of the penalty is retained by the bank, so we urge caution here, especially with lesser known or less financially stable names. Learn more here. {https://www.bestcashcow.com/can-you-always-withdraw-your-money-early-from-a-cd.html}).

Even if you can get out by paying a fee, if rates are going up, you still want to avoid locking in at this time.

We think inflation is here. We think interest rates could be dramatically higher in a year. We are seeing savings and money market rates over 2% at banks nationally and in most local markets and at credit unions. While 1-year CD rates at 2.65% look attractive now, we are betting that you will see savings and money market rates at or around these levels shortly.

Bottom line: Exercise caution vis-a-vis all CD purchases at this time.

Back before TIAA acquired Everbank, the latter made a name for itself issuing CD products that were aimed at unsuspecting, ill-informed customers looking for exposure to emerging markets and/or their currencies.

I warned customers about these emerging markets-based currency products back in 2014 here and again in 2017 here and again earlier this year here.

A constant theme highlighted in my articles has been that these products are not CDs at all and that their issuance may be illegal, violating the 1933 Securities Act. I maintain that position.

Another recurring theme is that depositors should steer clear of these products. Those few who did not find my articles and walked into Everbank’s trap are now sitting on broken products, hoping to recover some or all of their principal at maturity and consulting tax attorneys or accountants about how to handle the Original Issue Discount forms that Everbank (now TIAA) sends them for interest they will never receive.

Yet, Everbank, now renamed TIAA Bank after its acquiror, is at it again! The latest product looks up your hard earned money for 4 years and is virtually guaranteed to fail. The basket of five currencies upon which it relies (the Brazilian real, Indian rupee, Chinese yuan, Mexican peso and Russian ruble) are almost certainly going to decline against the dollar over the next four years, and the only measurement date is at maturity in 4 years. For TIAA Bank as the issuer this product is a safe way to attract long-term capital interest free from unsuspecting customers as the trajectory of emerging market currencies over a period of this length always leans towards a significant devaluation.

I recommend anyone looking for an example of the lengths to which people will go to sell crocked financial instruments watch the video trying to sell this product. The TIAA representative’s case for the buying instrument is based on the specious argument that “what goes down must go back up” combined with the appeal that they have done people a favor by omitting the Argentine peso and the Turkish lira from this one.

Bottom Line: All of these TIAA (previously EverBank) so-called CDs are bad, very bad. Folks who bought EverBank’s Icelandic Krone CDs got scalped in 2008. Even if TIAA didn’t know well enough to discontinue this program, the good news is that you now know to avoid it.

See all real 4 year CD rates here.

Over the last two days, I have been contacted by a number of people who have asked me about 5-year CDs.

I am not sure why this is all happening at once.

I did learn today that TD Ameritrade is apparently pushing a 5-year brokered CD offering 3.30% which is currently higher than any online 5-year CD rates offered on BestCashCow and at least some of their brokers are directing people to compare rates on BestCashCow. It should be noted that BestCashCow does show many local bank and credit union 5-year rates that are higher than the 3.30% TD rate. Moreover, BestCashCow has always strongly advised against brokered CDs because they are a different animal that provides less protection to the holder and cannot be terminated with the payment of an early withdrawal penalty (and we redouble that advice here).

I also think that many people – quite correctly in hindsight – bought 5-year CDs with their cash in 2013 and are on a laddering program or some other program and feel that they soon must buy another 5-year CD. My advice to these people is to put their programs away. The more likely direction of interest rates at this point in the cycle is for them to increase. The Federal Reserve and Jay Powell are pretty unequivocal. We are in September now and the Fed funds rate is clearly going to be raised twice before the end of 2018 (to 2.25% - 2.50%). The Federal Reserve’s most recent forecasts continue to guide towards a 3.125% Fed funds rate at the end of 2019 and a 3.375% Fed funds rate at the end of 2020. And, there is risk to those numbers. This Administration’s ridiculous trade “policy” could cause inflation that could drive the Fed to move by 2020 to a much higher Fed funds rate. So, if you are going to lock in for 5 years, I think you want a significant premium over that rate and the premium just isn’t there right now.

If you must buy something to augment your current savings rate, you would be much better off looking at 1-year rates. Several online banks are currently offering 1-year CD rates as high as 2.65%. If inflation comes soon and interest rates spike, you could even regret those purchases. But, the term is short and the opportunity for a significant mistake simply is not there.

See all of the best online 1-year CD rates here.

Editor’s Note: Marcus Bank and Synchrony Bank are both advertisers on BestCashCow. Please read our Advertiser Disclosure here.