Update July 20,2009 — Highest Online Certificate of Deposit Rates

It has been another down week for bonds. As the stock market seeks new hights (although, I’m not really sure why?), Bond prices have decreased and yields risen (bond prices and yields have an inverse relationship). This happend in June as well. Last month, some bank CD interest rates moved up, but that hasn’t really materialized here in July.

The top online 1-year yields are in the 2.50% range. Good rates are in the 2.00% to 2.25% range. The curve is fairly flat on terms of 1-year to 3-year. There is usually a tiny bonus for investing in 2-years CD. Most 2-year CD rates are about 0.25% higher than the 1-year, and the 3-year is usually another 0.25% above that, around 2.75%. Good 5-year rates are close to 3.40 to 3.60% APY.

One interesting way to search for interest rates is to type in the rate and the year. This usually brings up a list of websites with current online yields. And if, for instance, you are trying to find the hard to find 3%, you’ll probably find it within the top twenty or so pages. Try a search by state, too. For example, you could type New Jersey cd rates for current rates in New Jersey

For the time being, we will probably continue to see this back and forth between the stock market and bond market. Since the banks also understand it is a back and forth, give and take, they probably won’t respond with higher online CD Rates. I think it will take the Fed to increase Fed Funds to drastically change CD rates. That may not happen for another 9-months. Keep in mind that short-term yields will probably move up faster than longer-term rates, at some point leaving us with a flat or mostly flat yield curve. If at some point the curve inverts again (as it did in 2006/2007), I would lengthen your terms on your certificate of deposits. Lower rates are usually just around the corner from an inverted curve. However, I think we are in for a enduring time of low yields. The economy isn’t improving. Everytime they mention a greenshoot, news comes out that it really was a brownout.

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