CD Rate Trends This Week: Sept. 15

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Finally, at long last, CD investors have something to crow about this week, with rates up across the board during the Labor Day-shortened work week.

Call it Karma, call it a setback for economic bears, or call it an expected event now that summer is over and banks are back out on the market looking for new customers, with some good CD deals in their back pockets.

Just call it some much-needed good news for CD investors.

For the week, five-year certificates of deposit, crested the 2.3% barrier (albeit barely), while four-year CDs spiked to 2.05% from 2%. Down the ladder, two-year CDs rose to 1.57% from 1.54%, while one-year CDs inched upward to 1.1% from 1.09%.

At the lower end, three-month CDs rose to 0.52% from 0.5%, while six-month CDs blipped up to 0.76% from 0.75%.

All rates were measured by BankingMyWay’s weekly National CD Rate Tracker as of Sept. 14.

The rates were the highest increase, on average, for CD rates in months, although that’s not saying much considering the lousy performance demonstrated by shorter-term fixed-income rates overall.

Check it out. At around 1%, one-year CD rates are at their lowest levels since 1983. It’s the same for three-month CDs, which are at 20-year lows. At the higher end, five-year CDs are hovering around their lowest levels since 1984 – when Ronald Reagan was President, Apple Computer unveiled a brand new computer called the Macintosh, and a 25-year-old Michael Jackson was moon-dancing across concert stages all over America.

So why are CDs in the doldrums, and is this past week a sign that they’re rising from the ashes?

One reason is that bigger banks are wading back into the market with some decent yield deals. That’s a natural occurrence the first week after Labor Day, when bank marketing dollars shift into a higher gear. Take Citicorp (Stock Quote: C). Earlier this month, Citicorp rolled out a five-year CD with a highly competitive rate of 3.5%.

Bigger banks, which happily accepted government bailout money this spring, only to keep the hammer down and tight on deposit rates, can significantly move markets when they step in and raise deposit rates. If Citi raises its five-year CD rates, other banks will have to scramble to keep up, which results in a good deal for investors.

Such a trend could move the CD markets upward, but only temporarily, and only if the bigger banks continue to play ball. The bigger concern, of course, is the U.S. economy, which stubbornly refuses to deliver any earth-shaking news to shaky investors. Until we see more movement on the economy and  particularly on increased employment and higher consumer spending, uncertainty is the law of the financial land.

Wall Street hates uncertainty, so until things clear up, let’s hope that banks begin a nice run of competition over who can offer the highest CD rates. To that end, this week was a nice start.

Like clockwork, you’ll likely get your best CD rates by visiting BankingMyWay to see if you can’t dig up any good deals from larger banks.

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

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