The intense stock market volatility surfacing late this summer has done little to impact bank and credit union certificate of deposit rates.  While the stock market has seen days in which the major indices have moved by multiple percentage points from the open to the close, CD rates have showed little volatility continuing a mostly unbroken uptrend through the year.  The best CD rates available across the nation have moved by a little more than two basis points in the month of August.  One basis point is equal to 1/100th of a percent.

The CD rate index stood at 1.217% on Friday August, 28.  The index is off of the high point reached during the month of August, 1.220%, but is still within a few 1/1000ths of a percent from the all time high for the year.  The CD rate index measures the top ten highest CD rates available in all 50 states for three month term bank CDs, six month term CDs, one year CDs, two year CDs, and the five year CD. 

Even with the enhanced stock market volatility that has surfaced in recent weeks along with the prospects for an interest rate hike from the Federal Reserve becoming questionable, CD rates have slowly forged ahead.  This year started off with the CD rate index yielding 1.171%.  After experiencing some minor pops and drops through the winter and spring, gyrating between 1.160% and 1.171%, the CD rate pushed higher from June through August.  In June, the index moved up to 1.182%.  By July, the CD rate index crossed the 1.20% threshold to and reached 1.209%.  And in August, the average rate for the five most popular CD terms that make up the index reached 1.221%.

CD rates generally rise when market interest rates rise on products that are similar to CDs such as short term Treasury bills and notes.  Rates on competing products will generally rise when inflation surfaces or if the Fed nudges rates up with monetary policy such as increasing the fed funds rate.  Bank CD rates will also rise, independent of these events, if the demand for loans and lending activity expands.

A well managed bank will need to increase deposit rates when lending activity increases and they simply need more money to fund more loans.  As the market appears to be guessing what the Fed will do or when they will do it regarding changes to the fed funds rate, as evidenced by the heightened volatility, banks may have already spoken about their funding needs and have gently nudged rates higher to bring in more depositor funds.  Bank deposit rates may increase more substantially shortly after the fed funds rate hike is implemented.

To see a list of the current highest CD rates by term, review the following top ten lists: three month CD ratessix month CD ratesnine month CD rates, one year CD rates, two year CD rates, three year CD rates, four year CD rates and five year CD rates.

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