CD Rates This Week: Dec. 22

If you live in Phoenix or Los Angeles, the temperature outside your window might be rising. If you live in Philadelphia or Boston, the snow piled up by your driveway is as high as you’ve seen in a year.

But there’s always one place in America these days where the digits are falling — and that’s in the certificate of deposit market.

For the week, rates were down yet again, signaling another new low for the domestic CD market. For the week, one- and three-month CDs were down; to 0.403% from 0.41%, and to 0.618% from 0.623%, respectively.

One-year CDs declined to 0.917% from 0.925%, while two-year issues were off to 1.364% from 1.379%. At the higher end of the scale, four-year CDs dropped ever-so-slightly to 1.886% from 1.890%. Five-year models fell to 2.19% from 2.195%.

Obviously, the drop in CD rates last week wasn’t sharp, but it did represent a continuing decline in the value of bank CD rates this year — certainly bank investors will be happy to wave goodbye to 2009 with both hands.

But even with the drop in CD rates, it’s a fairly benign period for bank rates these days. Most banks — and probably a lot of investors — are distracted by end-of-the year tax positioning and by holiday shopping and Christmas parties. So there’s a not a great deal of activity in the bank CD market, anyway.

Much like we’re seeing in the U.S. mortgage rate market, the biggest driver of rates downward is the Federal Reserve, which announced Dec. 17 that it would keep its key rate low (from 0% to 0.25%), so as to keep priming the credit pump and help the U.S. economy get back on its feet.