By Brian O’Connell
There’s a growing school of thought among Wall Street fixed-income traders that banks are content to keep certificate of deposit rates low. With investment profits tough to come by, banks will continue to low ball CD customers every week and hope they don’t complain too much. So far in 2009, that strategy has worked out pretty well for banks.
After all, why give investors higher rates when a volatile stock market pretty much promises to keep them on the sidelines and burrowed into safe havens like CD’s and money market funds?
The answer is increasingly obvious. Banks don’t have to raise CD rates much and, for now at least, they’re not going to.
That’s been the case for the past week, where CD rates have fallen, pretty much in lock-step, with six-month CD rates falling from 1.14% last week to 1.12% this week. 60-month CD rates have slipped to 2.30% from 2.33% last week.
Banks are up against the wall these days. They're still trying to clean up toxic balance sheets, dig deeper to pay higher FDIC insurance, and refocus on profits, which have pretty much dried up. Consequently, it's an uphill climb, so to lighten the burden, they likely will keep the lid on CD rates, especially when anxious investors aren't rushing back into stocks.
Welcome to life in big banking circles these days, where a good week is when the FDIC does not announce any bank closings and the FBI isn’t holding on line two.
While that may be small comfort to CD investors, there are some decent deals out there if you don’t mind shopping around. To check the best CD rates in your area, use the sbup CD Rate Search.
Then, turn to sbup’s Certificate of Deposit Calculator to find out exactly how much you can earn on a good bank CD deal.