While many financial soothsayers have been predicting an eminent rise in interest rates, the week ended with interest rates noticeably lower yet again. 

The top bank CD rates were lower on the six month, one year and five year maturities while the two year CD rates remained unchanged for the week.  Bank CD interest rate reductions ranged from one basis point or 1/100 of a percent on the six month CDs to four basis points on the one year term bank CDs. 

In the Treasury market, the six month Treasury rates were lower by four basis points which pushed the yield down from 0.17% in the prior week to 0.13% by the close on Friday.  The one year Treasury also shed four basis points moving from 0.31% to 0.27% on the week.  The five year lost eight basis points closing at 2.20% and the ten year Treasury bond dropped seven basis points, starting the week with a yield of 3.43% and ending at 3.36%.

For both the six month Treasury rate and the one year Treasury rate, last weeks yields were lowest rates this year.  The five year Treasury rate and the ten year were measurably lower at the start of the year with the five year and ten year Treasury rates not crossing the 2.00% threshold on the five year and the 3.00% threshold on the ten year until mid February. 

Factors that are impacting Treasury rates are the lower dollar and excess reserves in the banking system.  The lower dollar is bringing foreign investment into the U.S which is often invested across different assets classes including short term Treasuries which provide security and liquidity.  Excess bank reserves are not being loaned out due to the precarious economic climate that leads the nations bankers to lend funds to only the most credit worthy customers, hence excellent credit and larger down payments are needed to buy homes and strong balance sheets and quantifiable sales are needed for new business loans.

Bank certificates of deposit rates take their lead from the competition within the banking industry as well as comparable market products such as money market funds and Treasury rates.  With Treasury rates lower, money market fund rates low and the outlier weaker banks that offered higher CD rates being shut down by the FDIC at rapid clip, CD rates look to stay low longer than the mighty prognosticators proclaimed.

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