This past week on Wall Street there appears to be growing belief that the economic recovery is insight.  The Fed Chairman chimed in after the annual Fed conference in Wyoming that the U.S. economy has “avoided the worst” and the recovery will be “relatively slow at first”.  Meanwhile the FDIC closed the doors on four more banks including Guaranty Bank of Texas which is the 11th largest bank failure in U.S. history.

The Fed appears to be upbeat, banks continue to flounder, job growth is a phrase not even heard, and the government budget deficit is at a historical U.S. record.  Scratch that, world record.  No government has the dubious distinction of hitting a budget deficit of over $1 trillion.  Once again, we receive conflicting data on the future direction of interest rates. 

While this debate on the direction of the economy builds up, CD yields were surprisingly stable to upbeat.  As most all bank rates and Treasury rates remained low this past week, it appears that the long run pressures for further reductions in CD rates looks as if they have subsided. 

For the week, the average yield on the one year term CD rates exhibited a mild increase.  The best one year term CD rates available nationally averaged 2.07% on the close of Friday.  This represents an increase of three basis points or 3/100 of a percent from the prior week’s one year CD rate of 2.04%.  

The best two year CD rates available nationally were unchanged.  Yields on certificates of deposit with a two year term remained at 2.36% to close the week.  

The average of the best five year CD rates also churned out a small gain.  The best five year CD rate hit 3.37% at the close of the week.  This rate is one basis point ahead of last week’s close of 3.36%. 

CD rates on the short end didn’t fare as well.  The best six month term CD rates moved lower by one basis point to close the week at an average rate of 1.75%.

Inflation expectations remain low; the Fed has made it clear that inflation is not an immediate threat.  The Fed is also not expected to increase the Fed Funds rate in 2009.  Other than government borrowing, bank borrowing by businesses and consumers is not expected to increase with any vigor during this year if at all.  With this input, we should expect CD rates to hold steady for some time and put a hold the near year long decline in bank rates available for CD investors.

Once again, some of the best CD rates are available in the state and regional markets.  In fact, the spread between the highest CD rates in some states is appreciably higher than the best national rates.  This includes CD rates in Texas, CD rates in Florida, CD rates in Maryland and more.  Higher CD rates can be found in almost every state now.

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