bank rates

Decline In CD Deposits Halted; Will It Last?

paper airplane $5 billCD deposits at banks and thrifts increased during the third week of May, according to Federal Reserve data.

So what, you say?

It was the first week in 2014 and just the 11th week in the last 229 in which the total amount of money in small-time deposit accounts didn’t fall. Small-time deposits is Fed-speak for CD accounts worth less than $100,000.

That May phenomenon occurred in less than 5% of the weeks since Dec. 29, 2008. That’s the date in which CD deposits reached their peak: $1.46 trillion.

On May 19, total CD cash stood at $524.7 billion, up slightly from $523.3 billion the week prior.

chart showing money in CD accounts

It’s no coincidence the start of this exodus coincides with the Federal Reserve’s move to cut the federal funds rate – a short-term, bank-to-bank interest rate that impacts yields offered to savers – to essentially 0%.

CD rates, which had fallen slightly throughout 2008, really began to nose dive after the Fed’s action. Average 5-year CD rates fell from 3.25% APY at the start of December 2008 to 2.38% APY by the end of January 2009.

Today, the average 60-month CD pays 0.79% APY, and it has held within two one-hundredths of a percentage point of that mark for more than a year now. The Fed’s rate-setting committee predicts it might begin increasing the federal funds rate in 2015.

Of course, you can find much better yields on our CD Rates Leaderboard and on our list of the highest CD rates from credit unions and local banks.

So we’re closing in on $1 trillion removed from CD accounts since the financial crisis hit.

Given the current state of interest rates, if we were to place a wager, we’d bet more money will flee CDs before we reach bottom.

The May reprieve may indeed be temporary.

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One Existing Comment
  1. Shorebreak said:
    on June 6th at 06:37 am

    How much of this “$1 trillion removed from CD accounts since the financial crisis hit” was put in the stock market? After all, that was what the Federal Reserve wanted.