The best certificate of deposit rates for the week ending May 8, 2009 saw declines for the short term and midterm rates and an increase for the long term CD rates.  The average for the best two year term CDs were unchanged for the week.  The average of the top ten CD rates with a two year term closed with an interest rate of 2.75%.  The average for the top ten six month CD rates declined two basis points or 2/100’s of a percent to 2.12%.  The average of the top ten best one year CD rates dropped by five basis points for the week to 2.61%.  The five year CD rates bucked this trend of stagnation or decline with the average for the five year CDs increasing in rate by three basis points to end the week at 3.53%.  

The changes for CD rates ran in the opposite direction of Treasuries for the week.  Treasury rates rose slightly across the yield curve.  Short term Treasury rates such as the six month and one year Treasury increased as well as long term, 10 year Treasuries.  In a typical market, this would have put some pressure on CD rates to rise instead of declining.  Forces putting pressure on CD rates to the downside is the increased improvement of the health in the banking industry.  US banks are not being nearly as aggressive in CD rate marketing to attract depositors as they have been in previous months.  As the overall level of competition dwindles to attract depositors with high CD rates the rates being offered are dropping. 

The CEO of Wells Fargo discussed such a factor indirectly on CNBC.  In the interview, CEO John Stumpf, discussed the bank’s improvement in interest rate margins due to the decline in the rates paid to depositors.  More specifically, Stumpf stated that the high rates being paid on the Wachovia CDs the bank had acquired were now expiring and the new rates being paid to depositors are appreciably lower.  Fortunately for Wells, these previous Wachovia customers are renewing at the now lower Wells CD rates.  Less than a year ago, Wachovia CD rates could be found on some of the state lists for the best CD rates. 

While many of the best CD rates offered regionally and locally have also seen a reduction in yields, many of the best CD rates remain in the local markets.  The best national CD rates will surpass those of some states and are often best used as a starting point or barometer to gauge the best CD rates and to compare bank rates in the local market.

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