Savings Rates At 2% - CD Rates Above 3.5% - Weekly Rate Update

Rate information contained on this page may have changed. Please find latest savings rates.

Average savings rates moved up slightly in the past week as several banks joined the BestCashCow rate tables with competitive rates. This included a non-promo savings rate at 2% APY. CD Rates held steady with the highest rating being a 5-year CD paying 3.55% APY. All rates are as of 2/22/2010.

Last week the Fed continued its policy of unwinding the unprecedented monetary stimulus by raising the Discount Rate from 0.50% to 0.75%. While the Fed made it clear this does not change its low rate policy, the move is still a sign that the Fed feels that the worst is behind us. The Discount Rate is the rate that the Fed charges banks for emergency overnight loans. Unlike the Fed Funds Rate, it has very little direct impact on savings, cd, mortgage rates, etc. offered by banks. The Federal Funds Target Rate remains pegged at 0-.25%.

Other relevant news includes data released by the Bureau of Labor Statistics which shows there is virtually 0 inflation even as the government floods the market with money. Inflation rose only .20% in January and almost all of that rise was due to energy costs. Core inflation, which strips out food and energy actually fell by .1%.

This data will provide no urgency to the Fed to raise the Federal Funds Rate. Their thesis of a slack market seems to be holding.

Looking at the Federal Funds Rate predictions chart, you can see that markets do not anticipate a rate increase through the June Fed meeting. I suspect the rate will stay pegged at 0-25% a good deal longer, and potentially through the rest of 2010.

A low Fed Funds Future rate means low rates on savings accounts, money markets, and certificates of deposit for a good deal longer.

Savings Rates

Average saving rates posted the first rise in 17 weeks. They rose from 1.45% APY to 1.46% APY. The increase was mainly due to the addition of three new banks to the rate, all offering competitive savings or money market accounts. These include:

  • Southern Community Bank offering a 2% APY savings account
  • Palladian Private Bank offering a 1.7% APY savings account
  • Colorado Federal Savings Bank offering a 1.4% APY savings account

Everbank still has the top rate with their 3-month promo of 2.25% APY for new money. After that, the new-comer Southern Community Bank is next at 2% APY. It's been awhile since we've seen a non-promo 2% APY rate for a nationally available account.

Other attractive CD rates are CNB Bank Direct at 1.50% APY and American Express Bank, FSB also at 1.50% APY.

CD Rates

The average 1-year CD rate rose by 1 basis point from 1.83% APY to 1.84% APY. The top rate continues to be 2% APY offered by Southern Commerce Bank.

The average 3-year CD rate rose by 2 basis points from 2.60% APY to 2.62% APY. The good news is that most of the rate leaders on the table remained stable. Hudson City Bank is the rate leader with a 2.8% APY 3-Year CD.

The average 5-year CD dropped for the first-time in four weeks, falling from 3.31% APY to 3.30% AP. Despite this, the top rate continues to be iGOBanking's 3.55% APY CD. Acacia Federal Savings Bank also has a competitive IRA only CD paying 3.50% APY. These top three rates have remained steady.

Both the cd spread and the savings/cd spread remain near record highs. What does that mean? It means as a depositor, you are being compensated more highly for putting your money into a longer-term deposit account then you were even a year ago. This isn't a suprise as savings rates have collapsed while longer-term CD rates have come down much more gradually.

As we discussed 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 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. Several banks have come out with breakable CDs, that allow users to withdraw money penalty free, and still othe banks are lowering the withdrawal penalty (Huge Change to Ally Bank CDs Will Benefit Savers) for removing money before maturity.


The Fed Raises the Discount Rate to 0.75% - Not a Sign of Tightening

Rate information contained on this page may have changed. Please find latest savings rates.

The Fed today released a statement saying that it was raising the Discount Rate, the rate it charges banks for overnight loans, from .50% to 0.75%. This change was expected and the Fed was careful to point out that it still expects to keep the more influential Fed Funds rate low for some time.

Here's the statement from the Fed on how the rate change will impact consumer interest rates:

"Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve's lending facilities. The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

As this article points out, the discount rate is not as influential as the Fed Funds rate in impacting interest rates and monetary policy. Nevertheless, there was a reaction in financial markets today. The dollar spiked and stocks retreated while in bond markets, Treasury prices fell and yields moved higher. These are all typical responses to anticipated higher interest rates.


Savings Rates and CD Rates Little Changed - Weekly Rate Update

Rate information contained on this page may have changed. Please find latest savings rates.

Savings rates and CD rates were little changed from a week ago, with rates moving 1 or 2 basis points for the various products. The top rates for various cd terms and savings accounts were unchanged from a week ago. The spread between short term and longer term deposit accounts remained elevated.

Last week the Fed gave its first indication that it might start raising rates sometime in the future. Bernanke stated that the Fed may raise the Discount Rate before long. The discount rate is the rate at which banks can take emergency loans from the Fed. It is not the same as the Federal Funds rate, which is more influential in impacting interest rates. Still, it's a start.

Over the past week, the issue of sovereign government default became more prominent as Greece jockeyes for a bailout from the EU. Many believe that Greece's debt problems are just a prelude to more problems from other highly indebted nations - Spain, Ireland, Italy, Japan. And some, like Marc Faber believe that mounting debt levels could even impact the United States.

A Federal Funds Rate predictions chart would show that markets do not anticipate a rate increase through the June Fed meeting. I suspect the rate will stay pegged at 0-25% a good deal longer, and potentially through the rest of 2010.

A low Fed Funds Future rate means low rates on savings accounts, money markets, and certificates of deposit for a good deal longer.

Savings Rates

Average saving rates hit a record low again last week moving from an average rate of 1.46% APY to 1.45% APY. While the averages have come down, the highest rates on the BestCashCow rate tables have remained steady. The highest rate is the Everbank Money Market Account, which is offering a 3-month guaranteed promo rate of 2.25% APY. The 1-year APY for the account is 1.51%. Following that is Franklin Synergy with a 1.75% APY and EBSB with a 1.67% APY. Other attractive CD rates are CNB Bank Direct at 1.50% APY and American Express Bank, FSB also at 1.50% APY.

CD Rates

Both the average 1-year CD rate and the average 5-year CD rate rose slightly over the past week while the average 3-year CD rate fell slightly.

The average 1-year CD rate rose by 1 basis point from 1.82% APY to 1.83% APY. The top rate continues to be 2% APY offered by Southern Commerce Bank.

The average 3-year CD rate fell by 1 basis point from 2.61% APY to 2.60% APY. The good news is that most of the rate leaders on the table remained stable. The top 3-year CD rate continues to be 2.8% APY offered by Hudson City Bank.

The average 5-year CD rate rose from 3.29% APY to 3.31% APY. The top rate continues to be iGOBanking's 3.55% APY CD. Acacia Federal Savings Bank also has a competitive IRA only CD paying 3.50% APY. The next best 5-year rate is Everbank at 3.37% APY. This marks the third week-in-a-row that 5-year CD rates have moved up.

Both the cd spread and the savings/cd spread remain near record highs. What does that mean? It means as a depositor, you are being compensated more highly for putting your money into a longer-term deposit account then you were even a year ago. This isn't a suprise as savings rates have collapsed while longer-term CD rates have come down much more gradually.

As we discussed 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 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. Several banks have come out with breakable CDs, that allow users to withdraw money penalty free, and still other banks are lowering the withdrawal penalty for removing money before maturity.