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Same Old Story: CD Rates Fall In May

It just kills me to have to write another post like this, but CD rates declined for the 19th straight month in May.

The average return on all five certificates of deposit we track finished the month lower than they were at the end of April.

CD rates declined for the 19th straight month in May, with all five of the terms we track finished the month lower than they were in April.Oh, and four of those five average CD rates will enter June at record lows.

I’d hoped the long decline in earnings power that began with the financial crisis in late 2008 and continued through the recession of 2009 might be slowing last month.

Unfortunately, the new data provide no indication that savings rates are finally bottoming out.

David Einhorn, president of the Greenlight Capital hedge fund, trashed the Federal Reserve policy that’s behind this decline in Thursday’s New York Times.

“The Fed wants to have low interest rates to fight unemployment…in a new version of the trickle-down theory,” Einhorn wrote. “The Fed hopes that by denying savers and adequate return on in risk-free assets like savings deposits, it will force them to speculate in stocks and other ‘risky assets.’

“This speculation drives stock prices higher, which creates a ‘wealth effect’ when the lucky speculators spend some of their gains on goods and services. The purchases increase aggregate demand and lead to job creation.”

As a result, Bankrate’s weekly survey of large banks and thrifts taken May 26, found the average annual yield for a:

3-month CD has fallen to 0.28%, down from 0.31% last month and 0.36% at the start of the year. That’s the lowest average since the survey began tracking 3-month CD rates in March 1989.

6-month CD has fallen to 0.42%, down from 0.43% last month and 0.50% at the start of the year. It’s the lowest average since the survey began tracking 6-month CD rates in January 1984.

1-year CD has fallen to 0.70%, down from 0.71% last month and 0.82% at the start of the year. It’s the lowest average since the survey began tracking 12-month CD rates in October 1983.

2-year CD has fallen to 1.12%, down from 1.15% last month and 1.24% at the start of the year and is the lowest average since the survey began tracking 24-month CD rates in March 1989.

5-year CD declined to 2.08%, down from 2.14% last month and 2.10% at the start of the year. That leaves the 5-year rate just slightly higher than the 2.06% reached in January, which remains the lowest average rate since the survey began tracking 60-month CDs in January 1984.

With average returns this low, you’ve got to take advantage of any better-than-average CD rates you can find in our database.

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