I started thinking...Then confirmed at the Schwab website. All the CDs that Schwab offers, have to have an equal or lower rate than Schwab Bank. Schwab says to the banks...Take it or leave it. If Schwab Bank wants or needs new cash money into their bank, it must come from customers...Usually from the brokerage side. I've noticed that one year US Treasuries are now higher than 1 year CDs on Schwab's website... I don't think they have my best interest at heart...
Banks use depositors money to buy short term treasury and repos to package a CD, generally quarter points lower than the same duration t bills. Bank’s nightly sweep is usually to a money market fund, which can be higher than that of a cd and few basis points lower than overnight rate. No one is gaming the system, but it is the different product, and they need to make money. See JPM’s earnings. no, they don’t give a s* about the depositors.
That would be the normal conservative approach... Schwab Bank extended out the yield curve and purchased long duration Treasuries. Now these securities are underwater & they have to be funded with higher yielding CD's. That's why Schwab Bank is keeping there CD rates as low as possible.
The funny thing is that Schwab's sweep money goes into Schwab Bank. They say it's much safer...Earning about .5% which is garbage. "But, but, it's FDIC insured" they say. You then must transfer the money into a money market fund, CD, or treasury for a high yield while waiting to reinvest. Again, Fidelity will "sweep" your money into a money market fund earning about 5%...Big difference.
%% LOL; OK, but my local banks last i looked dont offer ETF's or a money market payin' 5% WHY on Gods green earth would you think they have'' your best interests @ heart '' As a public co, or any private they would be bankrupt if the did that Enjoy your Us debt downgraded twice; but i seldom do 00.5% drama or call that garbage. So in way you are right=you+ SCHW's interest, diverge LOL
fdrxx is 4.9% last time i check, pretty close to fed funds rate, not complaining after years of few bps. 7-Day Yield 07/31/2023 4.93% Weighted Avg Maturity 07/31/2023 26 Days Weighted Avg Life 08/10/2023 72 Days
Fidelity is fine...Schwab, you have to manually transfer to a higher yielding product. I went on vacation for a week, had a US Treasure mature at Schwab. I had to get on my daughter's computer and put it back into another US Treasure. Just a hassle...Not in my best interest. When I sold my 1/3 of a acre lot the other day, I had the money wired to Fidelity. That same day, I was buying US Treasuries!! Beware of the float... I've shared this before...When CDs were yielding 7-8%, I would make sure they didn't expire on a weekend or three day holiday. Money the bank earns...Not me. When rates were below 1%, it didn't matter. Now it matters...Lost interest by not being on top of your funds.
%% MANUEL transfer?? Wow Realty requires a manual transfer, plenty of paperwork, gov paperwork, lawyer paper work,[ BPO] or certified appraisal......... a hassle ?? SCHW, IBKR....... fine, but mutually beneficial. Have too look @ both sides of the trade
You may want to check out these ETFs: SHV, BIL, GBIL, CLTL, SGOV. https://www.optimizedportfolio.com/t-bill-etfs/