Groucho Marx once remarked that he couldn’t join any club that would have him as a member.
Long-time certificates of deposit investors know what Groucho meant – the way rates are going, who’d want to be a member of such a lousy club?
Yes, the downward trend continues. Even though, as we wrote last week, the underlying economic evidence points to an imminent uptick in CD rates (based on an improving economy and subsequent higher interest rate policies from the Federal Reserve), that hasn’t happened yet – at least certainly not this week.
Much like last week, CD rates don’t seem to be much of an indicator for a burgeoning economy. More to the point, all the major categories fell even lower, according to this week’s BankingMyWay National CD Tracker. Three-month CD rates are up first, falling to 0.5% from 0.51%. Six-month rates fell to 0.74% from 0.77% and one-year CDs slipped to 1.08% from 1.1%. On the longer end, four-year CDs lagged at 1.99%, down from 2.0% last week. Five-year CD rates actually rose to 2.29% from 2.31%.
The rate environment has to be frustrating for CD consumers. Both the White House and the Federal Reserve have gone to great pains to say that, while the U.S. economy has a ways to go, the worst is behind us and the path before us is a slightly brighter one. Wall Street certainly seems to agree, with stocks up almost 50% since March. Even 10-year U.S. Treasury yields are beginning to creep back up again.
Even commodity prices are on the rise – that’s typically a harbinger of inflation, and a trigger for a subsequent run-up in interest rates.
But the old rules don’t seem to apply. Even though stocks, bonds and consumers prices are edging up, CD rates remain down. Why? Look to the banks, which refuse to extend credit to all but the most well-heeled borrowers. For big financial institutions, money remains cheap and the incentive to provide higher rate deals just isn’t a strong one.
Of course, that doesn’t mean you can’t get great CD rate deals. That’s particularly true if you focus on state-by-state bank deals, instead of relying on the larger, national banks to come across with better rate deals. If that’s the case, don’t hold your breath.
Consequently, if you’re a regular reader, you know the drill. You’ll likely get your best CD rates by visiting BankingMyWay and focusing on the state-by-state savings bank and savings and loans category.
Right now, those are looking like some of the best bargains out there for long-suffering CD investors who, no doubt, are tired of banks giving them the Marx Brothers treatment with low CD-rate shenanigans.