Trends in CD Rate Increases

stock marketWhile the FDIC continues to close banks and the stock market pushes ahead, certificate of deposit rates held steady for the week ending August 21, 2009. 2009 has been a disappointing year for interest rate sensitive investors such as certificate of deposit holders as interest rates have been on a steady course that has led to declining yields. This week’s survey of the best CD rates available nationally performed by has indicated a possible bottom to the downward slide.

The average for the best one year CD rates actually gained ground week over week according to’s weekly national survey of bank CD rates. The one year CD rate ended the week at 2.07%, an increase of three basis points or 3/100 of a percent for the week.

The best two year CD rates remained unchanged for the week. Two year CD rates held at 2.36% to close the week according to the weekly survey.

Five year CD rates also gained on yield for the week. The best five year CD rate average increased by one basis point, ending the week with a yield of 3.37%.

The six month CD rates bucked the trend and moved modestly lower. The average of the best six month CD rates fell by one basis point, closing the week at 1.75% from the prior week’s average of 1.76%.

Whether this is actually the end of the slide in CD rates is not clear. With the Fed clearly indicating there will be no imminent interest rate hikes in the near future and the U.S. economy not likely to move at a brisk pace anytime soon, significant improvements in CD rates seems unlikely.

Forecasting the direction of interest rates is a daunting task during normal business cycles and is clearly more challenging during this unprecedented economic turmoil. Forecasting interest rate movements is always susceptible to changing events that can impact interest rate markets and forecasts, with record budget deficits, continued bank failures and consumers weighted down with excessive debts and mounting job losses, uncertainty looms larger than ever.

High CD rates are still available and can be found mostly at the state level. At the close of 2008, most high rate CDs were being offered by online banks, national banks or banks that were headed for failure. Now the list of banks paying the best CD rates can be found among the regional banks, state banks as well as community banks.