CD Rate Trends: Sept. 22

It’s a “good news/bad news” week for bank investors this week. Rates aren’t down, but they’re not up, either. It’s the latter trend that is increasingly frustrating to certificate of deposit consumers.

The short-term future isn’t as rosy as CD investors would like, either. Despite the fact that the Federal Reserve is meeting next week, few economists (if any) expect the Fed to hike interest rates. Some Wall Street observers are openly whispering that the Fed may not raise through 2010.

With that cheerful thought in mind, the week-to-week CD numbers, as measured by the BankingMyWay National CD Rate Tracker, remained fairly even across the board.

Five-year CDs remained at 2.29%, while three-year CDs inched upward to 2% from 1.99%. Two-year CDs stayed level at 1.52%, while one-year CD rates held fast at 1.06%. Three-month and six-month CDs also stayed the same, at 0.48% and 0.75%, respectively.

With a hike in interest rates out of the question, CD investors’ options are limited. Take the high number of U.S. bank closings – up to 92 so far this year. Bank closings have significantly impacted CD rates in many states, and not for the better. It works like this: if 10 banks close in Southern Illinois, for example, the surrounding banks, with less competition, reduce the yields on their CDs, because they don’t need to aggressively purse customers. Chances are, the bank already has them as customers.

Banks – even ones in states with few FDIC takeovers – aren’t really helping investors out. True, some banks have taken the end of summer as a cue to provide some better deals for CD customers, but the incentive to boost rates just still isn’t there. Banks are much better off than Washington thought, before politicians endowed financial institutions with billions in taxpayer money. Swimming in cash, banks see no need to boost CD yields or even to lend money to anyone but the most creditworthy borrowers.

Consequently, there are no solid drivers in the certificate of deposit market to drive rates up any further than they are right now. True, this state of affairs cannot last forever, especially amidst some signs that the economy is turning around, albeit slowly.

It’s not a great environment to plant seeds and watch rates grow. In such a dry season for CD investors, your best bet is to hunt down the best bank CD deals yourself – because there are some good deals out there.

To get started, check out BankingMyWay. Start by  focusing on the state-by-state savings bank and savings and loans category – those are some of the best deals you’ll likely find right now.

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