cds

CD Rate Trend Index

April 2009
Panel: Short-termPanel: Long-term
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Will CD rates rise, fall or remain relatively unchanged? Experts and Bankrate analysts provide their insights.

Sentiment appears to be slowly changing from negative to a more neutral attitude.

Industry experts and Bankrate commentary
Experts' commentsShort-termLong-term
Investors shouldn't be venturing too far from safe havens unless where they go has little correlation to the S&P 500.
Lauren Prince, CFP, Prince Financial Advisory, New York
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Remain cautious! Although there are signs that we may have seen the worst of this recession, we still have a long and winding road to recovery. Our client portfolios continue to be underweight equities. For the risks involved, a well diversified bond portfolio may be a more suitable investment today.
Steven Lautenschlager, CFP, vice president, First Business Trust & Investments, Appleton, Wisc.
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There is an air of optimism out there right now but I believe it will be short lived. Why? Well, all the facts about the U.S. economy, how the government will handle the fine details of their plans and the financial well being of many individual companies is still all an unknown. In addition, the U.S. press isn't really spending too much time talking about the financial dilemmas of Europe and the European Union. What plays out in Europe can make an impact on not just the U.S. economy but also the global economy as a whole. We need to get our heads around the global situation and embrace the fact we are in a global village. We are all neighbors, whether water divides us or not. So if you are sitting in CDs now and using them as a safe haven, don't jump the gun. Sit back and relax. Better to be late to the party and right, then arrive early and be wrong. I am not expecting a lot of rate movement from the banks to the upside. Some of the speculation is that banks will offer higher rates to hold on to the CD and money market dollars they have acquired. I find this unlikely. Banks are being hit with higher FDIC insurance costs, so their margin of profit has been reduced. Whether they want to hang onto the dollars or not, they really don't have a lot of wiggle room to the upside for interest rates on deposit products for consumers. Also the banks know that the reason why they received massive amounts of inflow dollars to consumer deposit products in the first place and the situation has not changed. The consumer is still scared and concerned. The pain that has been felt will not be forgotten quickly. So stay safe folks! I think the groundhog will return to his burrow.

Disclosure: Michelle Ford is a registered representative with Securities America Inc., member SIPC. Vantange Point Bank and Securities America Inc. are not affiliated. Investment products are not bank guarantee -- not FDIC insured -- and may lose value.
Michelle Ford, CFP, vice president, Vantage Point Bank, Fort Washington, Pa.
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There are many opposing trends that will affect interest rates on certificates of deposit. While there has been a recent glimmer of hope that the economy's descent may be slowing, we would contend that investors are perhaps anticipating a rebound that may be slow to develop. We are still fighting a deflationary economic environment and there is more and more talk of inflation being a problem in the future. For these reasons, we expect rates to remain fairly static over the upcoming month.
Hebert G. Hopwood, CFP, CFA, president, Hopwood Financial Services Inc., Great Falls, Va.
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Bankrate's analystsShort-termLong-term
The best news savers can hope for is that CD returns might stop falling. But they won't rebound any time soon.
Greg McBride, CFA, senior financial analyst, Bankrate.com
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In reality, we'll probably still see CDs drift downward 1 or 2 basis points a week but it shouldn't be anything like the 10 to 12 basis point drops we've seen some weeks so far this year. The recent outflows from money market funds and inflows to mutual funds could be an indicator that people are ready to take on some risk. CD money is usually meant to be a bit more long-term than cash that's stashed in money funds, but banks may try to stem similar moves by not letting yields erode much more.
Laura Bruce, senior reporter, Bankrate.com
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Certified Financial Planners, Chartered Financial Analysts and others with similar qualifications are invited to e-mail us if interested in participating in our CD Rate Trend Index survey. Please state your professional background, title, company name and address.

About the Bankrate.com Rate Trend Index
Bankrate.com surveys experts in the financial planning, banking and mortgage industries to gauge whether certificate of deposit and mortgage rates will rise, fall or remain relatively unchanged. The deposit index panel consists of financial planners and representatives of institutions that offer FDIC-insured CDs to the consumer. The mortgage index panel consists of mortgage banks, mortgage brokers and other industry experts who are actively engaged in providing residential first mortgages to the consumer. Results from the CD Rate Trend Index are released monthly. Results from the Mortgage Trend Index are released each week.

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Product Rate Change Last week
1 Year CD 0.90%  0.01 0.89%
2 Year CD 1.03%  0.02 1.01%
5 Year CD 1.59% --0.00 1.59%
 
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