bank rates

New Leader In 60-Month CDs Pays 2.27%

Who would have believed it would get worse for CD savers before it gets better?

That seems to be the take-away as our CD Rates Leaderboard again suffers a blow, with yet another top national rate taken off the table this morning.

Since the Federal Reserve raised rates in December, E-Loan has moved its chart-topping rates in the opposite direction of expectations, deflating the top yield in three terms at this point.

The online portal of Popular Community Bank, E-Loan today dropped its 60-month return from 2.30% to 2.20% APY.

In doing so, it has passed the crown for the top nationally available bank yield on our Leaderboard to First Internet Bank of Indiana’s 2.27% APY.

While it’s true this lowers the top national return just three basis points, the plot line goes further back than today’s news.

Three weeks ago, E-Loan was paying 2.45% APY, a return it had offered since late July.

But then E-Loan lowered rates across three CD terms, to levels that kept its leader or co-leader status intact, while offering savers less on their deposits.

Today is the first time since E-Loan’s dramatic across-the-board rate increases last summer that the bank has willingly given up the lead by dropping its yield below the top competition.

Clearly, this is not the kind of news we expected to report once the Fed finally made its historic interest rate hike in mid-December.

After all, this is not Japan, where the central bank recently adopted a negative interest rate policy.

Here, the Fed did raise rates. It wasn’t by much, granted, but it was upward.

So why do I find myself more often reporting on lead decreases than increases the last eight weeks?

The bad news has been more heavily weighted to longer-term CDs, namely the top 36- and 60-month returns (the 48-month lead has held steady, but this is a much less common term on bank rate sheets).

Meanwhile, the 3-, 6- and 12-month yields have remained at pre-Fed levels or have gone up a smidge.

So besides observing that a quarter-point increase in the federal funds rate simply isn’t enough to move most banks, there also appears to be a reluctance to increase rates for longer maturities.

This is undoubtedly due to the large amount of uncertainty we’re seeing on when and how frequently the Fed will raise rates over the next few years, or even if it will raise them substantially at all.

It’s a global guessing game that even the Fed can’t predict, and apparently banks are hedging against locking favorable long-term rates until they know more.

That’s a hedge savers should also probably make right now, favoring the best short- and mid-term yields available until more of the Fed story line develops.

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