What is Possible in Different Interest Rate Scenario?

Callable step-up Federally Insured Certificates of Deposits are attractive to individual investors because they provide Federally Insured Deposits protection while typically offering higher yields than comparable quality, non-callable fixed income securities, and even some traditional callable bonds.

What happen to certificates of deposit If interest rates decline?

This higher yields or higher certificates of deposit rates are offered to compensate for the fact that, if interest rates decline, the issuer is more likely to call the step-up Federally Insured Certificates of Deposits before maturity in order to reduce financing costs.

Should this occur, the investor faces the prospect of reinvesting the proceeds received from the issuer of the Federally Insured Certificates of Deposit upon the call, at lower CD rates.

What happen to certificates of deposit If interest rates rise?

However, if interest rates rise, the issuer is less likely to call the step-up Federally Insured Certificates of Deposit, and the investor would continue to receive the preset "stepped up" coupons from the certificates of deposit.