bank rates

After 5-Year CDs, Are There Signs Of Life?

Folded $20 billLong-term CDs get all the glory, but do they deserve it?

Short answer: Yes.

Since the best nationally available 5-year CD hit its low a year ago, the top yield has improved by a third.

The best 60-month bank deal available to all U.S. savers cratered to 1.75% APY in May 2013. This week, it hit 2.31% APY on our CD Rates Leaderboard.

Just as there is no denying 5-year CDs are on the upswing, numbers don’t lie when it comes to the other terms we track.

It’s still ugly out there, folks.

Where is the recovery?

Term Low Current Percent change
36-Month CDs 1.40% 1.45% +3.6%
24-Month CDs 1.20% 1.26% +5%
12-Month CDs 1.05% 1.07% +1.90%
6-Month CDs 0.81% 0.87% +7.4%

What this shows is there really hasn’t been any recovery in any term other than 60-month CDs. The best nationally available deals are essentially still at the lowest point we’ve ever seen.

And that makes any shorter-term CD a particularly bad bet right now.

We have the Federal Reserve to thank for this. At this week’s meeting of the Fed’s rate-setting committee, the central bank reaffirmed its current thinking on when short-term rates might improve.

We wrote earlier this year about the Fed’s muddled message with regard to improving rates.

It appears that mid- to late 2015 remains the likely target for when we’ll see some relief.

That is, unless the Fed changes its mind – again.

From the Associated Press:

“(Federal Reserve Chair Janet) Yellen has tried to convey that the Fed is prepared to respond quickly to changes in the economy. But her emphasis on flexibility can also be tricky. It can leave investors uncertain and fearful of a sudden shift in the Fed’s approach to interest rates.

“Yellen’s message marks a shift from the approach her predecessor, Ben Bernanke, took over the past five years. Under his leadership, the Fed sought to be as publicly specific as possible about its intentions.”

Good times, savers.

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