December 12, 2008 Update
Certificate of deposit (CD) rates as well as savings and money market rates are slowly drifting down. Slow is the operative word. While the Fed has cut the Fed Funds rate by 325 basis points since January of last year (from 4.25% to 1%) rates on deposit accounts have fallen by much less. Savings account rates have dropped by 150 basis points, 12 month CDs by 100 basis points, and 3 year CDs by 50 basis points. Even with markets expecting the Fed to cut below 1% to either .5% or .25% rates remain relatively unchanged.
The average APY rate of various accounts acording to the BestCashCow rate tables dropped very slightly last week:
- Savings Accounts: 3 basis point drop from 3.43% APYto 3.40% APY
- 1 Year CD: 16 basis point drop from 4.05% APY to 3.9)% APY
- 3 Year CD: 9 basis point drop from 4.149% APY to 4.055% APY
- 5 Year CD: 9 basis point drop from 4.629% APY to 4.54% APY
As I saw last week, we still believe the trend supports a gradual drop on the rates paid on savings accounts, CDs, Money Markets, and other cash equivalent securities. If you have money you wish to deposit in a certificate of deposit, you may want to do it sooner rather than later before yield erodes further.
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