The last week of November saw the average for all bank certificate of deposit maturities end the month with lower yields along with bank money market account rates and bank savings account rates.  With rates starting the year at relatively low levels, there were not very many economists that expected rates to fall further.  However, as every bank CD and savings account investors is well aware of rates have managed to work their way down even further as this year has progressed.

The year has been especially harsh to the short term, six month term CDs, which have seen the yield reduced by a full percentage point over the past 11 months.  The short term maturities have also received the bulk of the CD investment dollars in the second half of the year.  At the start of the year the top ten best six month CD rates had an average yield of 2.65%, that figure is now down to 1.53%.  The one year CD interest rates fell almost as much, moving from 2.85% at the beginning of the year to 1.97% at the end of November. 

The two year and five year bank CDs were spared some of the pain brought on by a precipitously declining yield.  The two year term bank CD fell from 2.95% to 2.27% and the five year was lower by approximately 25 basis points, dropping from 3.65% to 3.36% year to date.  These records are based on the average for the best CD rates as measured by the top ten highest rates available nationally.

Treasury rates over the same 11 month period had very mixed results.  The six month Treasury bill started the year at 0.28% and ended November at 0.15%.  The Dubai events have little to do with the current low rates on short term Treasuries since the six month Treasury bill has been below .20% since September.  In fact, September was the first time in 2009 that the six month had fallen below 0.20%.  Possibly a harbinger for lower short term CD rates to come.

The one year Treasury started 2009 at 0.40% and closed out November at 0.27%.  For the one year Treasury, this rate is hovering at the lowest point of the year as well, but has fallen to this level only since mid November. 

The ten year is an anomaly.  The ten began the year with an interest rate at 2.46% and is now at 3.21%.  Through April of 2009, the ten year was under 3.00% for almost every trading day and then reached almost 4.00% in the first week of June before falling again from June forward.

What does this means for the future direction of bank CD rates……haven’t got a clue. 

In the mean time gold keeps moving higher which has a fair amount to do with the lower value of the dollar although oil has stayed in relatively tight trading range and it generally moves in the opposite direction of the dollar along with most commodities, all the while gold has forged ahead.  Hmmm, perhaps gold is not so much based on the value of the dollar as it is a hedge against inflation and market jitters.

Remember, bank accounts are safe and secure with bank CDs having the added attribute of a predetermined, fixed interest rate and income.  Equity investing can be a necessary evil but unfortunately while we all try to figure out why stocks are rising so much, the value of a stock is just a bet on what the market thinks it is worth.  Intrinsic value is near impossible to measure.  The value of a bank CD is predetermined and quantifiable today as well as in the future.  Equities are viable investments but the abrupt and sudden decline we just experienced in the past couple of years is definitive proof that the stock market is no leading indicator and sentiment combined with momentum often rules the day.

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