CD Rate Trends This Week: Feb.16

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The mainstream media is finally wising up to the thin gruel banks are offering up to loyal customers via low deposit rates.

In this morning’s The Wall Street Journal, Eleanor Laise writes about low bank rates under the headline "The Price of Safety Just Went Up."

The word “just” is highly debatable, as bank interest rates have been basically heading south since 2008, but the article makes many of the points we’ve been hammering here at BankingMyWay. Namely, that it’s a big, bad, bear market for bank interest rates these days.

Writes Laise: “The price of portfolio safety is soaring. Low interest rates and high market volatility make it more expensive to construct products offering income guarantees, downside protection and other sleep-at-night features. On top of that, Wall Street firms, still skittish from the financial crisis, are reluctant to offer generous guarantees.”

Laise uses that platform to point out that bank deposit rates are anemic. According to the BankingMyWay Weekly Interest Rate Tracker, rates are scraping the bottom of the barrel, with most categories returning less than a 1% return — and have been for months. Here’s a snapshot:

Category                 Interest Rate

12-Month CDs             0.859%

Money Market              0.362%

Bank Savings               0.233%

Interest Checking        0.136%

The problem is that investors are so skittish about protecting their wealth (or what remains of it) they’ll accept less than a 1% return on their investments just to insure that they won’t lose any money from their investment portfolio. The mindset out there on Main Street right now is this: it’s better to accept a 0.86% return on a one-year certificate of deposit than to chance blowing out 20% or so of your retirement fund in the stock market. Let’s face it — 2008 (when the Dow Jones Industrial Average fell 33.8%) isn’t that far behind us in the rear-view mirror.

But there’s a catch here for CD investors, and it’s a big one. In the self-fulfilling prophecy department, the more money poured into low bank deposit products, the less incentive for banks to hike interest rates. Why should they? The money is pouring in anyway, so there’s no need to offer more attractive rates on things like CDs and money market accounts if demand is high for those “safe haven” vehicles in the first place.

Increasingly, that’s the picture being painted in bank CD circles in early 2010. In lieu of any major, positive economic numbers, CDs find themselves boxed in. With more investors pouring resources into safer CD markets, look for banks to keep rates low until inflation kicks in somewhere down the road.

If there’s any good news this week, beyond the fact that the mainstream media is at least willing to point the spotlight on meager bank rates, it’s that short-term fluctuations are in favor of CD investors — at least for this week. Here is the national CD rate picture, as measured by the BankingMyWay Weekly CD Rate Tracker:

Description          This Week     Last Week

60-Month CD            2.186%        2.124%

48-Month CD            1.885%        1.837%

24-Month CD            1.319%        1.285%

12-Month CD            0.859%        0.841%

Six-Month CD            0.579%        0.566%

Three-Month CD        0.382%        0.371%

As always, knowledge is your best weapon in finding decent CD deals. So do your homework and visit the BankingMyWay CD Rate Search Tracker.

There, you’ll find the best CD rates on the marketplace — right at your fingertips.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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