With the Federal Reserve likely to begin winding down its $85 billion-per-month bond-buying program, it's only a matter of time before rates on certificates of deposit rise in earnest. And the first baby steps toward higher CD rates may have already been taken.
This week's CD rates roundup, the weekly survey of rates conducted by the diligent researchers locked away in the Bankrate basement, found that long-term CD rates bumped up a notch. The average five-year yield picked up 1 basis point and the yield on the average five-year jumbo CD is up 2 basis points. A basis point is one-hundredth of 1 percentage point.
That rise in rates happens to coincide with a report released earlier this week by Market Rates Insight, a pricing consultant to banks and financial institutions. According to its analysis, CD rates will gradually increase over the course of the next year, moving from long-term to short-term maturities.
From the report:
CD rates are very likely to start a slow and gradual increase between now and mid-2014. However, the gradual increase in rates will be sequential, starting with long-term CDs of three-, four- and five-year CDs, followed by mid-term CDs of one to three years, six months later, and finally short-term CDs of less than one year about four months after that. By mid-2014, rates of all CD terms will be higher than their current level.
Market Rates Insight based its analysis on the patterns seen in 2003 as CD rates increased over 10 months.
Have you noticed any slightly higher CD rates where you live?
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Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.