There’s not a lot of activity in the certificate of deposit market as the New Year draws near, and that’s reflected in the relatively moderate movement in CD rates.
The one piece of news that could conceivably impact bank rates is the announcement that the U.S. Treasury Department will lift the ceiling on its financial support for the two major secondary mortgage lenders, Freddie Mac (Stock Quote: FNM) and Fannie Mae (Stock Quote: FRE).
Supporters say the two lenders need a cash infusion to help homeowners find credit in a tough economy. Cynics say that the money is critical to keeping the lenders afloat.
If either Fannie or Freddie were to go under, and that’s a long shot right now, it would constitute a huge red flag for the already fragile U.S. economy, thus virtually guaranteeing the Fed’s policy of lower interest rates, and by extension, a continuation of lower bank CD rates.
But more realistically, we can expect to see little movement in CD rates over the next few weeks. Absent any big, positive economic news, or stronger signs of inflation, rates should stay pretty much where they are heading into 2010. There’s just not a strong enough economic headwind to warrant any excitement about CD rates.One good barometer to follow in the early months of 2010 is the U.S. unemployment number. At 10% right now, if the jobless number goes down, as measured monthly by the U.S. Labor Department, then look for CD rates to rebound. Historically, economists point to the labor market as the last key measure of an economic downturn’s length and severity. When unemployment numbers go down, it’s usually a solid indication that the economy is heading back up again.
For the week, CD rates took a familiar path, heading right down the line, as measured by the BankingMyWay Weekly CD Rate Search. For the week, one- and three-month CDs were down; to 0.38% from 0.4%, and to 0.59% from 0.62%, respectively.