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Investors flee CDs

By Sheyna Steiner · Bankrate.com
Wednesday, May 26, 2010
Posted: 12 am ET

It's an interesting time for market watchers, at least for those of us with no dog in the fight. (What a terrible figure of speech.)

Treasury prices swelled last week as investors sought safety from economic and political turmoil across the globe. The trend continued into this week, an Associated Press story reported Tuesday that yields on both the 10-year note and 30-year bond, had reached the lowest level of the year.

Bond prices have an inverse relationship to yields. When prices go up, yields go down. When no one wants them, yields go up.

A similar situation has been played out this year in CDs and money market accounts according to Market Rates Insight, a firm that tracks pricing trends and provides analysis for financial institutions.

There has been a noticeable shift of deposit balances from CDs to money market accounts in the first quarter of this year, says Dan Geller, executive vice president of Market Rates Insight.

Considering current yields on money market accounts, one might wonder why investors would flee from CDs. The average yield on money market accounts is 0.22 percent according to the most recent Interest Rate Roundup, though higher yields are available.

"Basically it’s a sign of uncertainty about the prospects of short-term economic recovery," says Geller.

"CDs are a term account and are a time commitment. We are seeing that less money is being committed and more is going to liquid accounts for the flexibility of pulling the money out right away," he says.

In today's market, fear is stronger than greed.

Are you waiting on the sidelines or do you have your money invested in the market now?

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3 Comments
Chi-TownCold
June 03, 2010 at 8:10 pm

Understandable, that consumers are moving towards MMA's vs. CD's due to the appalling abysmal low rates offered to them today!
Also that many lack faith in our financial and corporate institutions after the recent debacles!

But the capability to obtain "actual" real-time market rate information in a flash along with offers of any flexible account options and 'real-time' transaction methods with no or low fees will surely be a great incentive for most investors. The firm that can offer that will garner the most investor business.

But this current market seems to be indicating that development of a "new" method of investment planning is definitely required. The standard methods are seemingly "not worth a hill of beans", at the moment, no matter what the financial experts spout!

Maybe, we should simply revert back to the oldest investments of humankind: 1)the Barter System, 2)LAND!(vacant land for 'urban farming' or other development company acquisition), 3)Real estate (multi-family properties), 4)Gold, silver, other metals, 5)Commodities: (Agri. & Livestock) and/or 6)Futures; and just leave stocks, bonds, MMA's, CD's and IRA's alone for the meantime!

Whatever investment method you or I choose is always a 'gamble', but there has to be something better than the current abysmal low rates offered today!!!! And if you know of any higher value investments I would pray that you would be willing to share that info with your fellow investor's out here!

Wishing All of You The Best In Your Investment Pursuits!
Diana

Sheyna Steiner
June 01, 2010 at 2:31 pm

True...but, luckily, consumers have a world of options open to them. There are online banks, national banks, local banks and credit unions. With a little searching, most consumers can find the least greedy or incompetent financial institution for them.

Witold
June 01, 2010 at 2:08 pm

No one profits when the Banks stop offering a reasonable interest rate to their "loyal" or it's now "less loyal" customers. The Greed and Fear is not on the consumer side, but the trust is lost and it's going to take some time to earn it back.