Short-term CDs just aren’t attractive at the moment. The 10-year Treasury is now pushing 4% - changing the entire yield curve. While the Fed may try desperately to hold rates low, but the reality is that inflation is a real threat at the moment. If we do see inflation, savings and money market rates will quickly go up. Since savings rates are very close to, and in many cases – above, short term CD rates, they are your better bet. There is a real risk of higher rates, and if they were to fall, they don’t have far to fall anyway.
Comments
Sam Cass
June 11, 2009
What do you mean by short term? If I put something into a 1-year CD then I can always reinvest the money in 12 months once rates have risen.
I would think the danger would be in longer-term CDs, where I'm locked in. As the analysis on this site shows, those rates have stabilize more than the shorter-term ones but that doesn't mean they aren't going to spike.
A 12-month at 2.49% sure seems better than a 5-year CD at 3.80%.
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