It’s time for the monthly check-up on CD and high-yield savings rates and this month there is a change in a six-month trend. As usual, I used the fabulous service of MoneyAisle, the on-line auction house. All MoneyAisle participating banks are FDIC insured. For a $10,000 deposit, here is what the MoneyAisle auction could get me if I buy a CD for various time frames:
| Maturity | 12-1-09 | 1-1-2010 |
| 12 months | 1.92% | 1.92% |
| 24 months | 2.21% | 2.21% |
| 36 months | 2.68% | 2.68% |
| 48 months | 2.79% | 2.94% |
| 60 months | 3.25% | 3.25% |
For comparison purposes, a participating MoneyAisle bank offered me a 1.60% rate on a high-yield savings account (the rate was 1.61% last month).
As you can see, across every time frame tested except at 48 months, rates are the same compared to last month. Since June, these s
avings rates have been drifting lower each month. Even though savings rates continue at relatively low levels as the economy starts to climb out of the Great Recession, it seems as though we may have hit bottom. Recent economic conditions are improving as evidenced by the Chicago Fed National Activity Index . Longer term economic forecasts are also improving, even though we’ve yet to see that optimism reflected in savings rates. Given these facts, there are two action items for you to consider:
1. Use this table to compare the rates you're receiving on your current emergency or short-term savings and decide if you're satisfied with your return. If not, consider using MoneyAisle to improve your returns.
2. Consider starting to switch your longer term bond holdings to shorter term. As interest rates rise, the value of a bond fund goes down. Longer maturity bond funds are more sensitive it is to rising interest rates. So if you have a long-term bond fund, at least consider moving it to an intermediate term bond fund; if not a short term bond fund. If you have an intermediate term bond fund, consider moving at least some of your holdings to a short term bond fund.
This is not a do- it- right- now, kind of trend change. As you can see from the MoneyAisle chart, rates are bottoming out and not moving up yet. But it seems interest rates may be moving in that direction soon. Time will tell, of course, but it is prudent to start thinking about your next bond move.
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