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For three weeks, CD rates in the weekly Bankrate rate survey remained relatively stable. This week they lost ground again. Since the beginning of January, the average one-year CD yield has plunged 32 basis points, from 0.81 percent Jan. 6, to 0.49 percent on Wednesday.
The decline in the average yield for five-year CDs has been even more dramatic, falling from 2.1 percent at the beginning of the year to 1.5 percent in today's rate survey.
For nearly half of this year, CD rates fell weekly according to Bankrate's rate research, but could the recent stability portend better days, or at least not worse ones?
It's nothing to get excited about, cautions Greg McBride, Bankrate's senior financial analyst.
Because Treasury yields have rebounded a bit on better economic news, the erosion of CD rates has also eased.
"I think it's something to watch," says McBride. "We've gone through these periods before, where it looked like CD yields were reaching a bottom. And then the economy softens further, Treasury yields decline further and before you know it, CD yields are moving down further. I think it's like calling a no hitter in the second inning at this point, but it is worth watching."
"If the economy is going to demonstrate a consistent track towards improvement, that is an ingredient for CD yields bottoming -- maybe not recovering right away, but certainly reaching that long awaited bottom," he says.
Right now a stable economy is high on everyone's holiday wish list -- CD investors in particular.
What's your prediction for CD rates? Truly, a few more months of decreases and depositors will be paying banks to take their money.
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When I recently learned my company was dropping their 401 (k) at the end of this year, IRA CDs has been one of the options I've looked into to "rollover" my plan into since my 401 has been anemic in the stock market. I might first start with a 12 month and then see if interest rates are headed upward before taking the plunge into any long term CD. Perhaps rates will be up another 1% or 2% by year's end 2011.