CD investors, by nature, have to be a stoic lot.

After all, the urge to go off like a bottle rocket after yet another week of slow, but steady, depreciation of their bank CD yields could be a tempting one.

So far though, investors have managed to keep their powder dry, as evidence mounts that CD rates may finally be reaching year-long lows and will rebound once consumer sentiment wanes, Treasuries rise, and inflation takes a firmer grip on the U.S. economy.

Let’s go straight to the numbers. CD rates, as measured by BankingMyWay’s weekly CD rate tracker, continue to peel back across the board. At the short end, three-and six-month CDs are down from 0.65% to 0.62%; and 0.96% to 0.93%, respectively.

Up the scale, one-and two-year CD’s are down three basis points from last week, to 1.26% and 1.54% this week. Four- and five-year CD’s are also down ever so slightly, off three and two basis points, respectively, to 2.05% and 2.22% for the week.

But evidence is mounting that a bottom may be near. Both LIBOR rates and commercial paper rates – both forward-looking indicators for bond rates – are sliding a bit over the past few weeks, typically a sign that the bond market is mounting a comeback. Perhaps a better indicator is that Treasury bond rates, which need to go higher for CD rates to follow suit. Treasury rates have bumped upward in recent weeks, and in all categories, including six-month, one-year, two-year, five-year, and ten-year Treasuries on the rise, although not yet to the levels we saw back in February. Any rise in Treasury rates are bad for mortgage borrowers, which take their cue from the Treasury market, but can be manna from heaven for CD investors, who can eventually expect to see CD yields rise in tandem with Treasuries – even though that hasn’t happened yet.

Priming the Treasury pump, too, is a glut of new bond auctions in the past few weeks. Those new issues are needed to help the U.S. government pay for over $1.3 trillion earmarked so far in federal bailout money. One fly in the ointment for Treasury performance is the increasing uneasiness on the part of foreign investors who are beginning to question Uncle Sam’s credit quality. Already, Russia is signaling that it’s going to cut back on U.S. Treasuries. And U.S. Treasury Secretary Tim Geithner got an earful from Chinese investors on a recent trip to the Far East.

As a result, we may be seeing a bottom in CD rates very soon, but if there’s a chance, it may not be a solid one if foreign investors begin pulling back on Treasury investments. Until then, CDs should soon follow other credit instruments and rates should rise.

Right now though, it’s basically not a question of “if”, but “when”.

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