Yields on long term certificates of deposit available nationally ended the week rising while short term certificates of deposits yields continue to drop or remain unchanged.  The average for the top ten best five year CD rates stood at 3.61% up to two basis points or 2/100 of a percent for the week.  The average yield for the top ten best two year CD rates remained unchanged at 2.75%.  The best one year CD rates average decreased by five basis points to end the week at 2.52%.  The yields on six month CDs declined by two basis points to end the week at 2.08%.

Investors that may have been hoping for better yields on the shorter term certificates of deposit are being frustrated.  Normally the prospect for higher returns on the long term bank CDs would be welcome news, however the longer maturities are more risky in this current economic environment.  As the federal government continues to throw money at the economic mess the likelihood of higher interest rates is increasing as the supply of US Treasury securities increases.  The increase in interest rates in the longer term CD maturities therefore comes with a higher degree of opportunity loss and inflation risk should rates rise substantially within the next couple of years and erode the value of the current fixed rates.

Although the long term CD yields have improved over the past week, investors should be mindful of locking up too much money for a long term at these current CD rate levels.  The combination of the anemic economy and the large supply of Treasuries coming to the market is making investing in interest bearing investments such as bank CDs and money market accounts a serious matter.  Simply rolling over maturing CDs or parking available investment funds in the local banks low yielding CDs is becoming a riskier prospect.  CD shoppers have to evaluate all alternatives and measure the spread between near term CDs while seeking out the banks with the best yielding products.  Comparing the best national CD rates should be a starting point followed by a review of the best local state CD rates that are available.

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