Zions Direct Online CD Auctions Update

This is a follow-up to my previous post Bank CDs by Auction: Name Your Own Yield. The second online CD auction at Zions Direct closed today at 2:02 pm EST. Up for auction was $2 million 3-month CDs issued by Zions First National Bank with a coupon of 5.25%. The auction received 88 bids from 51 bidders. The final market clearing yield was 5.33%.

As in the first auction, large bidders continued to dominate. Bidder 13192 entered a bid at the very last minute for 2,000 CDs at 5.33% while there were only 2,000 CDs available in the auction. Their bid determined the final result. Whoever bidded for a lower yield (higher price) than that from Bidder 13192 won. Those who wanted a higher yield than what Bidder 13192 accepted lost. [Source: auction result on Zions Direct.]

5.33% yield is still pretty good. It wasn’t good enough for me (T-Bills are better), because of the state income tax. But for people in states without state income tax or who want to purchase CDs in an IRA, the difference in state income tax treatment is not an issue. 5.33% APY would place it as #3 on Bankrate.com’s list of highest yielding 3-month CDs in the country. I just checked the brokered 3-month CDs from Fidelity. The highest yield there is 5.20%. I can see the Zions Direct online CD auctions being a viable option for people who dislike opening up accounts with different banks when Zions Direct delivers high yields consistently.

There are two more auctions this week, for 9-month and 1-year CDs respectively. The 9-month CD auction is already underway.

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