Certificate of deposit rates for bank CDs available nationally were mostly lower with the exception of the long term CD rates which remained unchanged for the week ending May 29.  Though interest rates were not overly active among the different terms the end result and the long term trend has been an increasing spread between short term rates and long terms rates.  Certificate of deposit rates started the year with an approximate spread 1.05% between the best national six month CD rates and the best five year CD rates.  That spread ended the week at 1.56%.

Local and regional CD rates displayed much greater volatility as a number of banks marketed new promotional CD rates while others began reducing their existing CD rate offers to more closely follow the national rates.

Though the slope of the two yield curves, the Treasury curve and bank CD rate curve, is getting closer the process in which they reached these results was dissimilar.  Treasury long rates have risen while the short term rates have remained unchanged whereas bank CD long rates have remained stable and the short term rates have dropped. 

The six month CD rates experienced the greatest change, dropping from and average of 2.08% down to 2.05%.  The one year CD rates were not that far behind in the magnitude of the rate change with the averages for the best one year CD rates falling to 2.51% from 2.53% the previous week.  The two year CD rates were down by only one basis point or 1/100 of a percent to 2.74% and the average of the best five year CD rates was unchanged for the week.

The increased volatility in local and regional CD rates generally leads to a better opportunity in the local markets as banks compete more aggressively for local community dollars when rates move more robustly.  One can take note of the conspicuous absence from any of the bank rate lists of names such as Wells Fargo, Chase, Bank of America, etc…  In fact, of the top ten largest banks in the nation their names are barely mentioned in any of the top state bank lists and are not present on the national lists.  Even with massive amounts of CD deposits, B of A has over $235 billion in CDs alone, these banks do not try and compete for depositor funds.  An important note may be that Bank of America did lose $3 billion in CD funds in the first quarter.

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