It’s a mixed bag for certificates of deposit rates this week, with rates rising ever-so-slightly on the short end but staying level on the long end of the ladder.

For last week, interest rates on six-month CDs rose 0.90% to 0.92%, and one-year CD rates increased from 1.23% to 1.24%. But two-year CDs fell from 1.59% to 1.54%; four-year rates stayed the same at 2.05%; and five-year CD rates also leveling off at 2.22% - the same rate as last week.

Rates shouldn’t be moving significantly either way anytime soon for several reasons (all of them relating to the continuing U.S. economic slide).

First, despite a good week for U.S. Treasuries, as measured by the solid interest in the week’s seven-year note auction, there is growing alarm at home and abroad over Uncle Sam’s mega-spending spree. Last week, noted Wall Street bear Robert Prechter predicted that the U.S. would lose its AAA credit rating by late 2010. That would no doubt trigger a huge run-up in U.S. interest rates in just about every credit market.

Then the World Bank came out last week and estimated that global gross domestic product would fall by -2.9% in 2009. That led to a run on stock exchanges around the world. If doubts linger too much longer over the global economy, more investors would likely turn away from stocks and start thinking about stashing cash in safer alternatives like binds, money market accounts, and CDs. But with rates so low on the CD side, investors might consider making a move, but will wait a while longer – the low yields just aren’t worth it, yet.

Then there’s the issue of commercial loan spreads. Right now, banks can get some sweet deals from the Federal Reserve on commercial loans, with loan rates at only 0.25% or so. With money so cheap, where’s the incentive for banks to bump up CD rates? That scenario shouldn’t change anytime soon. Last week, the Federal Reserve said that it expects to continue its policy of offering low bank loan rates “for an extended period”.

What does that all mean for CD investors? It all depends, as usual, on the economy. If job losses keep piling up, and the U.S. housing market doesn’t pick up any steam, the economy will suffer. Historically, lousy economies mean lousy CD rates.

For now, the best deals are at the higher end of the CD ladder. Sure, 2% rates on five-year CDs may not seem like much, but in tough economic times like this, anything is better than nothing.

For the best deals on CD rates, plug into the BankingMyWay CD rate search finder.

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