CD interest rates worsened considerably over the past week while most bank rates and Treasury rates remained relatively stable.  Greater stability in CD rates may have been expected this week as well since the stock market appears to be shrugging off concerns over European debt issues and dismal U.S economic growth. 

The strengthening stock market is generally a sign of economic growth which should lead to increased production and demand for loans and ultimately result in higher interest rates as demand for loanable funds expands.  Two factors fighting this position is the fact that banks are awash in funds and do not need to aggressively compete for additional deposits with higher rates and the Fed has made it clear it intends to keep interest rates low for an extended period of time.  In addition, inflation or the expectation of higher inflation is also a key driver for interest rates and the sluggish economy and potential world slow down has kept a lid on any signs of protracted rising costs.

For the week ending October 21, 2011 CD interest rates as measured by the weekly CD rate survey, fell by 1.4 basis points to end the week at 1.142 percent.  The index measures the average rate for the top ten highest three month CD rates, six month CD rates, one year CD rates, two year CD rates and five year CD rates.  One basis point is equal to 1/100th of a percent.

The average rate for the best three month CD rate was unchanged this week.  The average rate for the short tern bank CDs remained at 0.527 percent.  Hudson City Savings Bank continues to hold the top spot with a three month CD rate at 0.75 percent.  The Virtual Bank CD and One West Bank CD with three month terms are next best certificates available and are also unchanged this week at 0.60 percent.

Running out on the curve a little further to the six month CD rates and the average rate slips quite a bit.  The average six month CD rate dropped down to 0.860 percent or 2.2 basis points lower than the prior week’s average six month CD rate of 0.882 percent.  The highest six month CD rate fell by four basis points and is available at Ascencia Bank after Aurora Bank’s six month CD rate, the previous term leader, was chopped from 0.99 percent to 0.82 percent.  The second best six month CD rate comes from Giant Bank which offers this CD terms with a rate of 0.90 percent.  Two basis points lower comes the six month CD of CalFirst Bank which has an interest rate of 0.88 percent.

The top one year rates had an average rate this week of 1.104 percent which is the same as the previous week.  Doral Bank continues to offer the highest one year rate with a CD yielding 1.15 percent.  The second best one year CD now comes from CIT Bank which offers consumers a one year CD with a yield of 1.13 percent.  Only one basis point behind CIT Banks CD is the one year term CD of AloStar Bank which promotes a CD at 1.12 percent.

The average rate on the highest two year CDs was reduced by 2.3 basis points.  The average two year CD rate settled down this past week at 1.278 percent after moving down to 1.301 percent in the week earlier.  Four banks share the top honors with the highest two year CD rate available nationally.  USAA Bank, Ultima Bank of Minnesota, American Express Bank and AloStar Bank of Commerce all promote two year CDs with interest rates at 1.30 percent.  The remaining six banks that round out the top ten bank rates in this term have rates that fall within a very narrow range between 1.28 percent at Pacific Mercantile Bank to 1.25 percent which is available ion a two year CD at Stonebridge Bank and NewDominion Bank.

The average rate for the best five year CDs was down by 2.8 basis points pushing the average rate to 2.02 percent from 2.048 percent in the prior week.  First Internet Bank is a stand out this week with a five year rate at 2.20 percent.  This CD rate is a full 15 basis points above the next best rate for this maturity.  The second best five year CD rate comes from Nationwide Bank which offers a 5 year CD at 2.05 percent.  In third position is State Bank of India where a five year CD comes with a yield of 2.02 percent.

To find more information on the best CD rates by maturity please see the following CD rate tables at three month CD ratessix month CD ratesone year CD rates, two year CD rates and five year CD rates.

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