Buying a one-year CD sporting a rate under 1 percent can be hard to swallow. The prolonged low-rate environment has caused a sustained drop in income for retired people and those nearing retirement.
It's hard on the other side as well. Rates are so low now that it's actually hard to construct a CD that people will buy, according to a May 31 story on Risk.net, website devoted to financial risk management news and analysis.
From the story, "Certificates of deposit becoming 'harder than ever to structure:'"
"With rates getting so low, especially in the past month, some CD structures just cannot be produced," says John Tessar, head of structured products at Florida-based distributor JVB Financial.
As a result, CD purchasing has slowed dramatically, says Tessar. "Though simple step-up structures still have some traction, once the initial coupon is lower than 1%, investors' appetite wanes."
According to Bankrate's weekly rate surveys, many CDs have paltry rates often under 1 percent -- in fact this week's interest rate roundup showed that the average yield on a five-year CD barely breaks 1 percent -- it's currently at 1.11 percent.
Do you have a rate threshold at which buying a CD just makes no sense?
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