Market uncertainty regarding economic activity in the U.S and abroad has brought down stock valuations and resulted in more money flowing into the safety and security of bonds and other secure investment options.  The stock and commodity sell off and pushed most bank rates down to their lowest level of the year.

As of the first week of February, mortgage rates have dropped to levels not seen since the third quarter of 2014 and the market is showing signs they will continue to fall further in the very near future.  The average 30 year mortgage rates is now well under 4.00% and have breached the 3.75% threshold at many of the top mortgage lenders in the nation including Chase Bank, Wells Fargo, and US Bank.

Treasury rates have matched the moves in mortgages with the ten year Treasury bond sliding down to 1.86% by February 5th and the rate on the benchmark bond opening even lower on Monday morning, February 8th.  Short term Treasury rates tumbled as well, but without the force that was present in the longer term maturities.  While the ten year Treasury is down 38 basis points from the start of the year, 2.24% to 1.86%, the six month T-bill is down by just four basis points, falling to 0.45% on Feb 5th from 0.49% on January 4th.

The dramatic difference in short term rates versus long term Treasury rates can be seen unfolding in bank CD rates.  As the interest rates on Treasuries and mortgages moved demonstrably lower, CD rates have hardly budged.  CD rates generally follow the rates available on short and midterm, low risk investment options as opposed to the rates found on the longer end of the yield curve such as mortgage rates and ten year Treasury rates.

The average rate on the highest yielding CDs available nationally was unchanged during the first week of February as measured by the CD rate index.  The average held at 1.255%.

The CD rate index measures the best CD rates marketed by financial institutions in all 50 states for a three month CD account, six month certificate, one year CD, two year account, and five year certificate of deposit.

The floor or support in short term rates follows the Fed’s decision to raise the fed funds rate in December of 2015.  Fed funds rates are the model of short term rates since the rate is based on ultra-short, overnight lending between banks.  Longer term interest rates are indirectly influenced by the fed funds rate but there can be a substantial delay before the market reacts to changes in the short end of the curve especially when the adjustment is orchestrated by the Fed.  In addition, extenuating circumstances can hold down long term rates albeit, for only a limited period of time.

The extenuating circumstances effecting long term rates in the current environment are widespread and robust.  Economic sluggishness in China, monetary easing running amok in Europe and Asia, commodity prices in the toilet, a significant stock market correction, corporate profits falling behind, and fear of recession in the U.S. looming.  All these pressures on the economy work to keep interest rates low as investors flock to bonds and out of more risky investment options.

Bank rates market recap for February 8, 2016:

CD interest rates:
Composite CD interest rate index 1.255 percent
3 month CD rates 0.451 percent
6 month CD rates 0.895 percent
1 year CD rates 1.259 percent
2 year CD rates 1.465 percent
5 year CD rates 2.207 percent

Money market and savings account rates:
Bank money market rates and savings account rates 1.040 percent

Mortgage rates:
30 year mortgage rates 3.684 percent
15 year mortgage rates 3.053 percent
20 year mortgage rates 3.525 percent
30 year jumbo mortgage rates 3.499 percent
30 year FHA mortgage rates 3.725 percent

Credit card rates:
Credit card rates for new credit card offers 13.89 percent

US Treasury rates:
Six month Treasury rate 0.45 percent
One year Treasury rate 0.55 percent
Two year Treasury rate 0.74 percent
Five year Treasury rate 1.25 percent
Ten year Treasury rate 1.86 percent

All bank savings rates and lending rates are based on surveys conducted by at the close of February 8, 2016 with all of the interest rates obtained directly from the banks within the survey.  Treasury rates are obtained directly from the Department of the Treasury.

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