By Brian O’Connell
Bank CD rates fell universally downward last week, perhaps due to the recently-completed Federal Reserve Board’s 19-bank "stress test," which appears to have disrupted month-long average yield swings to the upside in most CD categories.

Long-end or short, CD rates fell across the board. Five-year CD’s fell from 2.24% last week to 2.29% this week, while four-year CD’s fell even further, from 2.24% to 2.13%. One-year CDs and six-month CDs also dropped, from 1.49% to 1.40%; and from 1.13% to 1.07%, respectively.

Though, it’s tough to pin the blame for lower rates on the Fed’s stress test, as the U.S. Government remains quiet on the results of the tests. But it’s sufficient to say, if any bad news develops, even moderately bad news in the form of a few banks being undercapitalized, rates should continue their southward slump. After all, weak banks have a hard time competing with healthier ones, so there would be little pressure for stronger banks to hike CD rates in such an environment.

Couple that with the fact that Treasury Bond yields, which typically impact CD rates, remain fairly static, and there seems to be no impetus for CD rates to move significantly, one way or another, unless the stress tests reveal some real surprises.

Other factors that should continue to impact CD rates are bank closures; four banks were by the FDIC last week alone, and one of Florida’s larger credit unions was placed under FDIC control. 

For CD investors, the best environment for good rates remains not on the national level, but at the local level, especially at nearby credit unions. Credit unions typically can offer higher CD rates, thanks to their non-profit status. With revenues rolling back into the credit union, and not into the pockets of executives and shareholders, as in the case of many banks, unions can afford to offer investors higher CD rates.

For the best deals on both a national and local level, visit BankingMyWay.com.

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