CD Rate Trends This Week: March 30


Signs of hope, however fragile, seem to be appearing on the economic horizon. That should mean higher interest rates for certificate of deposit investors, unless there is a backlash over rising public debt levels in the U.S.

For now, the good economic news is holding sway. Let’s have a look:

  • Consumer spending spiked upward in February — that’s the fifth consecutive month that consumer spending has risen, according to the U.S. Commerce Department
  • Private sector wages were up, as well, albeit incrementally. The Commerce Department says that wages and salaries were up by $1.9 billion in February. While that number does represent an increase, it did pale to the $16.6 billion rise in wages recorded in February. Overall though, the wage trend is upward.
  • The Commerce Department reports that the gross domestic product number for the last quarter of 2009 was revised to 5.6% — the largest increase in six years.
  • The Dow Jones Industrial Average rose 0.4% yesterday to 10,895.86, its highest level since September 2008.

Historically, a stronger economy is a harbinger of higher bank investment rates. The Federal Reserve is the driver here, as it usually hikes its benchmark Federal Funds rate when the economy improves, in an effort to stave off inflation. If the economy shows more vibrancy, it might force the Federal Reserve’s hand sooner than most economists expected. The consensus among Fed watchers is that the Federal Reserve would wait until late 2010, if not 2011, to raise interest rates. But that timetable could be moved forward if stronger economic data rolls in.

One more key factor in play these days that impacts CD rates: U.S. Treasury rates rose last week as the benchmark 10-year T-bond ratcheted upward to 3.85%, a rise of about 20 basis points in the past few weeks. Typically, CD rates follow the path of Treasury rates — so one good marker for bank investors is to keep following the 10-year T-bond. If it continues to rise, then bank CD rates should, too.

For the week, CD rates haven’t caught up to the more promising economic news — they’re still down across the board. Here are the numbers, as measured by the BankingMyWay Weekly CD Rate Tracker.

Description          This Week     Last Week

60-Month CD            2.12%          2.127%

48-Month CD            1.816%        1.821%

24-Month CD            1.249%        1.263%

12-Month CD            0.791%        0.808%

Six-Month CD            0.527%        0.54%

Three-Month CD        0.342%        0.348%

You don’t have to wait for a broad-based hike in CD rates. To get the best deal right now, visit the BankingMyWay CD Rate Search Tracker.

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