Last week the Fed reaffirmed its commitment to keep rates low and that seems to have opened the floodgates for banks to lower rates.

Average CD rates were down significantly over the past week, with some terms showing declines not seen since the height of the recession. Despite the drop in averages, top rates remained the same for 1 and 3 year CDs while the top 5 year CD followed the average lower.

The average 1-year CD rate dropped by 12 basis points from 1.83% APY to 1.71% APY. That's the steepest drop in the average since March 13, 2009 when the average declined by 14 basis points. Despite the decline in the average, the top rate remains a 2% APY CD from First City Bank. First City is offering a top rate but be sure to stay under FDIC insurance limits - it is rated as 0 stars according to Bauer Financial for its safety and soundness.

The average 3-year CD rate dropped by 5 basis points from 2.62% to 2.57% APY. USAA Federal Bank continues to have the top rate with a 2.81% APY 3-year CD. The minimum deposit for that rate is $175,000. While you need a military connection to quality for their loan and insurance products, you do not need one to take advantage of USAA deposit products. In the banking world, USAA is highly regarded for its banking products and services.

The average 5-year CD plummeted 13 basis points from 3.31% APY to 3.19% APY. That's the largest drop since March 2009 when the average dropped 19 basis points. That period also marked the low point in the stock market.

In terms of top 5-year CD rates, BankUnited dropped its rate from 3.50% APY to 3.25% APY. As a result, USAA now also has the top 5-year CD rate at 3.41% APY. Everbank has also dropped its rate and now sits at the #2 spot with a 3.33% APY CD (last week it was paying 3.47% APY).

The spread between savings rates and CD rates hit a record this week as savings rates and short-term CD rates continued to decline while longer-maturity CDs held their return.

Below is the chart:

In addition, the spread between 5 year cd rates and 1 year cd rates (the pink line) also reached a record high. The increasing spread indicates that banks are compensating longer-term deposits more now than ever before.

Investors may want to consider opening longer term accounts. While many analysts believe rates are poised to go higher in the next six months, this isn't necessarily pre-ordained. In his article, Inflation: Why There Won't Be Any, BestCashCow's Sean Riskowitz makes the case that a lack of bank lending will keep inflation and by extension interest rates low. This squares with my own analysis of Japan (Could Interest Rates Stay Low Despite Growing US Debt - Look at Japan), which shows that high government debt and "printing money" does not necessarily lead to inflation and high interest rates.

Average CD rates were mostly flat this past week.

The average 1-year CD rate dropped slightly from 1.84% APY to 1.83% APY ove the past week. The top rate remains at 2% APY and is offered by First City Bank. First City is offering a great rate but be sure to stay under FDIC insurance limits - it is rated as 0 stars according to Bauer Financial for its safety and soundness.

The average 3-year CD rate dropped by 1 basis points from 2.64% APY to 2.61% APY. Tthe top is currently USAA Federal Savings Bank with a 2.81% APY 3-year CD. The minimum deposit to get that rate is $175,000. While you need a military connection to quality for their loan and insurance products, you do not need one to take advantage of USAA deposit products. In the banking world, USAA is highly regarded for its banking products and services.

The average 5-year CD remained at 3.34% APY and BankUnited continues to have the top rate at 3.50%. Acacia Federal Savings Bank is also offering an IRA only 5-year CD that pays 3.50% APY. Everbank continues to offer the next highest rate at 3.47% APY.

The chart below shows that CD rates have largely stabilized although there is still a slight drift down in short term rates and savings accounts.

As we note in this article (Spread Between Savings Rates and CD Rates Hits Record High), the spread between short term and longer term deposit accounts reached a record high last week.

The elevated ratio means it may be worth taking a look at a longer-term CD, especially one that doesn't have an onerous early-withdrawal penalty. You can now earn more than 1.5 percentage points more by opening a 5 year CD versus a 1-year CD. If interest rates stay low for the next couple of years, as is possible, then perhaps this elevated spread makes opening the account worth it.

Regardless of this analysis, CD laddering may be a good way to smooth out the return you receive from your CD portfolio.