Article Treasure Cove

What are the current Highest CD rates? Are we in an upturn, downturn, or just coasting along? Investment rates throughout the spectrum of opportunities have never been so volatile. What are the causes? Are there any solutions? How will the highest CD rates respond?

All very good questions. Let’s take them one at a time. First, where are we now? CD rates are still falling across all terms. CD rates on the 1-year term are averaging around 2.25% and the 5-year around around 3.40%. That makes for a fairly wide spread, but sadly the rates are so low. The highest rates we have seen lately are a 3.15% for a 1-year term and a 4.00% for a 5-year term.

With the Fed keeping Fed funds at basically 0%, that is putting downward pressure on Bank CD Rates. In addition, with the Fed’s recent purchase of 10-year bonds, rates will probably come down further. Rates will most likely remain at these lower levels through 2009 and maybe into early 2010. At some point, the Fed will have to reverse course and begin raising rates.

At the moment, housing is still on a precarious perch. Many ARMs (Adjustable Rate Mortgages) are set to re-set this year, 2010, and even 2011. With the current price of homes being down 40 to 60% depending on when the home was bought, refinancing will be next to impossible. The Government is trying to roll out programs and even some banks have begun to privately offer loan modifications. However, with unemployment rising, some people will unfortunately not be able to afford their home no matter what. A 1-year freeze on mortgage payments could help. Many of the banks that have received TARP funds should be able to afford it.

Global deflation is also a worry. As the US has begun to drastically reduce spending, wharehouses are beginning to see stockpiles of merchandise. This is good for prices, but bad for those who will have to be let go. In addition, the Fed’s recent actions are undermining the dollar which makes it more expensive for foreign companies to do business with us. The saddest part is all of the bail-outs, TARPs, TALF, etc. are doing nothing to address the problems. They are in essence sweeping it under the rug. This will not bode well for the future.

My solution for Jumbo CD Rates has continued to be the same. When it comes to CD investing, build a laddered portfolio. Keep some funds in cash instruments for emergencies. We will continue to keep you up to date with current and Historical CD Rates Information. If you are investing in bank CDs make sure they are FDIC insured (banks) or NCUA insured (credit unions). Moreover, checking the soundess of the institution is a good idea. With so many banks in a troubled state, you don’t want to take the time to make a CD investment and have it closed a week later.

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