Top CD Rate 3.31% APY - Savings and CD Rates Flat for Third Straight Week

Savings and CD rates barely moved at all in the last week as the environment can best be described as flat. This marks the third week in a row that rates have barely budged. I haven't seen such a quiet period in the last two years.

Savings Rates

On the savings front, average rates stayed steady at 1.36% APY. While CNB Bank Direct dropped their online savings rate by 10 basis points from 1.35% APY to 1.25% APY, Sallie Mae Direct raised their rate from 1.25% APY to 1.40% APY. The top rates remained steady with Southern Community Bank's Ready Saver 2% APY Savings Account leading non-promo rates. For promotional rates, Everbank remains on top with their 3-month introductory bonus rate of 2.25% APY. After the three-month period, the rate drops down to 1.26% APY for a blended one year APY of 1.51% APY. Banks that dropped their rates include:

CD Rates

The average 1-year CD remained steady at 1.61% APY. First City Bank continued to hold the top spot with a 1.80% APY CD. First City Bank is in bad financial shape and has been operating under a FDIC Cease and Desist Order since 10/09. Tennessee Commerce Bank maintained the second spot at 1.70% APY.

The average 3-year CD rate also remained steady at 2.47% APY. Like last week, the top spot is occupied by USAA Federal Savings Bank, which requires a minimum deposit of $175,000. The next highest rate is Acacia Federal Savings at 2.65% APY and a $500 minimum deposit.

The average 5-year CD rate is the only one that changed at all from the previous week. It rose a miniscule 1 basis point from 3.16% APY to 3.17% APY.

USAA has the top rate at 3.31% APY. Everbank continues to have the second highest rate at 3.30% APY. versus the 3.39% APY it was offering last week.

The Fed and Interest Rates

Rates are stuck between the Fed's direction and the recovering economy. Last week, at the Fed's FOMC they reiterated that they plan on keeping rates exceptionally low for an extended period of time.

An article in Bloomberg from two weeks ago, points out that there is no evidence of inflation on the horizon and if anything, deflation is a bigger concern.

"Demand for U.S. government bonds is increasing. On average, the Treasury received $3.21 in bids for each dollar sold at 10- year auctions this year, compared with $2.63 in 2009 and $2.41 from 2004 through 2008, according to data compiled by Bloomberg.

“Part of what’s frustrated bond vigilantes has been that economic data has ratified the notion of modest growth and continued declining inflation,” said Wan-Chong Kung, a money manager who helps oversee $89 billion at FAF Advisors in Minneapolis, the asset-management arm of U.S. Bancorp."

At the same time, GDP readings for the first quarter have come back strong and just today, the government announced that manufacturing grew in April at the fastest pace since 2004.

The chart below shows that while the spread between different deposit accounts is still high but is no longer going up. It refleclts the lack of change in any of the rates we have been following over the past three weeks. Perhaps the Spring weather has distracted bankers or maybe everyone is on the fence, trying to decide which wasy the economy, inflation, and rates are headed.