bank rates

Are The Big Banks Considering A Return To Competitive CD Rates?

Now that the Federal Reserve has bumped up the federal funds target rate a quarter of a point, we may have seen the first sign that the so-called “too-big-to-fail” banks are at least looking at offering competitive CDs again – something they haven’t done in a long, long time.

This morning, we noticed that banking behemoth Wells Fargo has begun offering through Fidelity Investments a 2-year brokered CD yielding 1.25% annually and a 3-year brokered CD yielding 1.55% annually.

Wells Fargo sign

While neither rate matches the top nationally available returns from the banks on our CD Rates Leaderboard, we think the offerings could be significant for several reasons:

  • The yields are generally competitive in the CD marketplace and far exceed the rates posted on Wells Fargo’s website for comparable certificates of deposit opened directly with the bank, either online or at a branch. The best “bonus” yields Wells Fargo currently offers in California are a paltry 0.25% for 26-month CDs and 0.35% for 39-month CDs.
  • These new brokered CD rates substantially exceed Bankrate’s national average for these maturities, currently 0.43% and 0.53 APY, respectively.
  • While Wells Fargo frequently offers brokered CDs through Fidelity, in the recent past these CDs have generally had longer maturities, featuring limited protection against early call and interest payments quarterly or semiannually. These new 2- and 3-year offerings are protected against early call and pay interest monthly.

We’re speculating, of course, but maybe this all indicates that Wells Fargo is testing the waters of the retail CD market now that interest rates seem to be headed in an upward direction.

In other words, the bank may be seeing what sort of demand there is at the retail level for CDs having, while not the best, at least competitive terms. (We’ve forgotten the last time Wells Fargo offered a CD that was competitive in the retail marketplace.)

If this is the case, maybe we’ll see the bank’s posted rates for direct CDs – as well as those of others in the too-big-to-fail crowd – rejoin the world of competitive yields, from which they’ve been absent for far too long.

It’s still too early to tell.

But we’ll be watching closely.

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