The stage is set for higher certificate of deposit rates — even if it didn’t happened last week. Why the slow trigger?
Most likely, banks haven’t caught up with the reality of a rising interest rate market, but they will soon. That reality lies in a combination of factors: an improving economy, inflation potential and an increasingly competitive rate environment triggered by higher Treasury rates.
That last factor may be the biggest reason that CD rates are destined to bump upward — and soon. Ten-year Treasuries finally hit a closely-watched benchmark on Monday, with interest rates rising above the 4% level. That should attract more attention from investors, especially this week as the U.S. Treasury Department has four Treasury auctions totaling $82 billion.
Treasury notes haven’t hit 4% since October 2008. Economists view this scenario as a good piece of economic news, since rising Treasury rates historically signal a strengthening economy. Reinforcing that notion was a positive jobs report last Friday, with the U.S. Labor Department reporting a net-plus 162,000 jobs in March — the first time in two years that the U.S. hasn’t actually lost jobs.
Another clue that bank deposit rates may be on the rise — an 8.2% upswing in pending homes sales in February. A stronger housing market is a potentially huge sign that the U.S. economy is on the mend, as more homebuyers stop kicking tires and start writing checks. That’s a sign that the vaunted U.S. consumer is growing more confident, albeit incrementally, about the U.S. economy.