Signs that the economy is growing slightly stronger, or at least that we’ve hit a bottom, continue to push Treasury yields upward.

The question bank customers want to know is: "will CD rates follow?"

Here’s what we know this week. According to BankingMyWay’s bank CD rate tracker, CD rates are flat at the opening of this week. Rates for 60-month CD’s are at 2.26%, down from 2.28% last week. Moving down the rate ladder, the status quo prevails: 48-month CDs are at 2.10% this week, exactly one basis point off from last week. 24-month CDs, one-year CDs, and six-month CDs all are following a similar track, all only off by a few basis points.

But Treasuries are tracking upward, with rates on one-year Treasuries cresting 3.25% last week, and rates on 30-year Treasuries are well over 4.00%. Typically, when rates on U.S. Treasuries rise, sooner or later, CD rates rise with them – and that should be the case here.

One reason, and it’s a big one, is that the U.S. economy seems to be getting healthier. Consumer confidence, as measured by the Conference Board Consumer Confidence Index, moved upward in March, and improved considerably in April. According to the Board, its consumer confidence index now stands at 39.2, up from 26.9 in March.

Then there’s the jobs numbers, which seems to indicate that the harsh unemployment climate is softening. The U.S. Bureau of Labor and Statistics reported last Friday that the U.S. economy shed 539,000 jobs, roughly 100,000 less than anticipated. Better news -- the unemployment numbers for February and March were revised downward.

A stronger economy lifts bank CD rates because more people will leave the safety of the bond market for the potentially more rewarding stock market, which tends to provide better results on an economic upswing. Faced with fewer people wanting CDs, banks will have to raise interest rates to compete, and bring more people back into the fold.

That said, few economists are predicting a he economic recovery any time soon (although the White House did release a statement from its economic team that Gross Domestic product should grow to 3.5% by the end of 2009). But even the perception of economic stability should be enough to trigger a hike in rates.

It’s not a question of “if”; but only a question of “when”.

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