Where Are the Certificate of Deposit Vigilantes?

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We always hear about the bond vigilantes and how they are destined to arrive at any moment. However, as seen in the chart above, the certificate of deposit vigilantes are nowhere to be seen. Why do you suppose that is?

The following chart shows how much more the typical certificate of deposit "vigilante" could earn if they'd simply buy 5-year treasuries directly from the government instead of buying the typical 5-year CD from their local bank. As an added bonus, they wouldn't even need to worry about FDIC insurance.


Click to enlarge.

I participated in February 2011's treasury giveaway, much to the dismay of Jeremy Siegel. No complaints on that one so far. I also participated in June 2013's treasury giveaway (using interest from my purchase in 2011). No complaints on that one either.

I bought intending to hold to maturity. That is still the plan. Meanwhile, investors panic out of bond funds and into cash the instant interest rates go up? I can't really explain it. I guess many don't enjoy earning more interest. Need proof? Can we not see the willingness of savers to accept a mere 0.5% rate on 5-year CDs?

That said, I'm not at all advocating the purchase of a 5-year treasury. For what it is worth, I went out a heck of a lot further on that steep yield curve. Unlike many, I do not believe that this economy can support high real yields either now or well into the distant future. It has there for been my plan to lock real yields in whenever I could and I have been doing so since 2000 (the year I bought my first I-Bond).

This is not investment advice. It's just the opinion of a random anonymous blogger on the Internet. Take it for what it is worth.

Source Data:
St. Louis Fed: Custom Chart