What are the current highest CD rates? Are we in an upturn, downturn, or just coasting along? Investment rates throughout the spectrum of opportunities have never been so volatile. What are the causes? Are there any solutions? How will the highest CD rates respond?
All very good questions. Let's take them one at a time. First, where are we now? CD rates are basically still flat across all terms. We have seen a little premium being offered on the longer-term versus the shorter term, but not much. The highest rates we have seen this year are a 6.30% for a 15-month term in May and a 6.20% in March for a 2-year term. Keep in mind that those were specials that didn't last long.
The average range we have seen this year is between 5.25% - 5.50% across all terms. We are currently a little above that with 1-year rates around 5.55% and 5-year rates around 5.65%. Since January, each time the FOMC has kept the overnight rate at 5.25%, rates have edged lower with some 2-year to 5-year CDs slipping to as low as 5.15%. Over these last few weeks inflation scares have kicked back in and treasury yields climbed. As the anxiety has hung around a bit, CD rates have climbed. So we are currently in an upturn.
I don't believe the current levels will hold. I believe the inflation readings that the FOMC uses will remain tame, they will hold rates, and the rates will edge back down to the 5.25% to 5.50% range. Most likely, the highest cd rates will return to being on the 6-month and 1-year terms. If the FOMC raises rates, they will surely crush whatever chance housing has at a recovery. If they lower rates, the economy and housing will get a boost, but they fear the buy-out / merger mania spinning out of control.
Of course, since we are part of the global economy these days, we are affected by what goes on in the world. As inflation has heated up in other parts of the world those countries have raised their rates. As a result, some investors (and some very big ones) have begun to move some of their money elsewhere. If this move grows, our country will be forced to raise rates to remain competitive.
My solution has continued to be the same. When it comes to CD investing, build a laddered portfolio. Keep some funds in cash instruments for emergencies. If you are young and can whether some storms, find a good money manager (we even know of a few :O) ) and invest in some products that meet your risk profile. And of course keep funds in safe, secure, insured CDs and call us for the highest cd rates.
We will continue to keep you up to date with our blog and our compare cd rates page.
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Chris Duncan is a NASD Registered Representative. He specializes in helping clients find the best and highest CD rates nationwide. His clients include individuals, financial institutions, corporations, and public agencies.
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