Bank CD rates continued down a path of lower yields for the week ending July 3, 2009.  Even though the expectations have been for higher CD rates, banks reduced the rates offered on the majority of certificates of deposit maturities.  Bank CD yields presented on the highest bank rates moved lower across all CD terms with the exception of the two year term.

The general consensus of economic forecasts has been calling for a greater probability of higher rates in the immediate future that would ultimately push yields on bank rates higher.  Bank CD investors, regrettably, have not seen any of the fruits that should come with the prognostication of higher rates.  Interest rate sensitive investors have been enduring the slow reduction in CD rates for the majority of this year. 

The outlook for rising rates may also have seen a turning point this past week.  The Federal Reserve appears unlikely to raise rates anytime soon and the predominant concern for rising interest rates based increased Treasury supplies and inflation may be unfounded.

The President of the Federal Reserve Bank of San Francisco, Janet Yellen, said last week that the prospect that the Federal Reserve will leave U.S. interest rate near zero for the next several years is a possibility.  Yellen added that the concern for inflation is that it may be too low over the next several years.  And Yellen further expressed a view that the U.S. may be facing a bigger risk of deflation rather than inflation.  Those sure were a couple of noteworthy statements to digest for a few hours or the weeks ahead.

As for the best CD rates that are now being promoted, the average for the best six month CD rates available nationally is now at 1.91%, down two basis points or 2/100 of a percent from last weeks average of 1.93%.  The average of the highest one year CD rates is at 2.26% down from last week’s close of 2.27%.  Yields on certificates of deposit with maturities of two years inched higher and ended the week at 2.51% or three basis points above last weeks average rate of 2.48%.  Meanwhile, the longer term five year CD rates stayed the course on this downward trend and ended the week with average yield of 3.60% down five basis form points from last weeks average rate of 3.65%.

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