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5-year jumbo CD rate hits a low

By Sheyna Steiner · Bankrate.com
Wednesday, October 3, 2012
Posted: 4 pm ET

Things are not good in the land of certificates of deposit, as if you didn't know know already. But the war of attrition on CD rates has reached a new, mind-boggling low. The average five-year jumbo CD yield is now 0.99 percent, according to the Interest Rate Roundup, Bankrate's weekly rate survey.

Let's break down that craziness.

For a mere $100,000, banks offer jumbo CDs. In a normal interest rate environment,  banks typically offer a higher interest rate over the rate for a regular CD in exchange for your sizable deposit.

For instance, back in January of 1995, the spread between a five-year CD and a jumbo five-year CD was 22 basis points. A basis point is one-hundredth of 1 percentage point.

These days, tying up a hundred grand for five years earns you exactly 1 basis point, on average, over a regular five-year CD, which currently yields 0.98 percent.

At these CD rates, would you invest? What's a better alternative?

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