CD Rate Trends This Week: March 9


Along the certificate of deposit spectrum, two-year CDs stand as a beacon of light to frustrated bank investors — they were the only CD class to rise last week (and not by much).

Hey, any port in a storm, right?

Other than two-year CDs, every other category gave more ground last week, as measured by the BankingMyWay Weekly CD Rate Tracker:

Description       This Week     Last Week

60-Month CD         2.133%        2.139%

48-Month CD         1.828%        1.837%

24-Month CD         1.274%        1.272%

12-Month CD         0.819%        0.832%

Six-Month CD         0.548%        0.55%

Three-Month CD     0.355%        0.358%

The fact that rates keep falling leads to few other conclusions than this one: banks don’t believe an economic recovery is forthcoming, or at least one that’s worth shouting about.

Consequently, with major uncertainty in the equity markets these days, investors still cling to low-yield CDs like a life raft in a tsunami. It’s not an ideal situation, but it’s better than having no life raft at all.

Banks — one of the few industries coming out of this economic mess smelling like a rose (not a surprise, given the horse manure unloaded upon taxpayers to separate them from $780 billion to bail out troubled banks) — have it figured out. They’re not going to hike CD rates when there is no significant sign of investors abandoning the meager rates they’re getting now.

That’s why this week’s CD numbers represent a low for 2010. Particularly troubling is the six-point tumble by five-year CDs; a nine-point decline in four-year CDs; and a 13-point drop in two-year CD rates. Going long has been one of the better options for CD investors in recent months — it represents a safe haven investment with at least a yield of 1% or more on their money.

But recent rate snapshots reveal that the market is chipping away at even these low CD rates — not a good sign for CD investors this week.

Another reason why banks are pushing rates downward is the weak consumer confidence number that came out last week. The January-February number declined by 10.5%, leading banks to conclude that the public remains on the sidelines, reluctant to borrow and spend in such an uncertain job market. No question, consumer sentiment has been weak, month-to-month, and that picture shouldn’t change anytime soon.

Not a pretty picture. But as we said last week, that doesn’t mean there aren’t some good CD rate deals out there. To check out the best ones, visit the BankingMyWay CD Rate Search Tracker.

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