It has been another depressing week for bonds. As the stock market seeks new hights (although, I’m not really sure why?), Bond prices have gone down and yields risen (bond prices and yields have an inverse relationship). This happend in June as well. In June, some certificate of deposit interest rates moved higher, but that hasn’t really happened here in July.
The highest online 1-year certificate of deposit rates are in the 2.50% range. Good rates are in the 2.00% to 2.25% range. The yield curve is fairly flat on terms of 1-year to 3-year. There is usually a little bonus for investing in 2-years Certificate of Deposit. Most 2-year CD rates are about 0.25% above than the 1-year, and the 3-year is usually another 0.25% higher that, around 2.75%. Good 5-year rates are around 3.40 to 3.60% APY.
Typing the year and rate will produce some interesting rate data. This usually brings up a list of websites with current online interest rates. And if, for instance, you are attempting to find the elusive 3%, you’ll probably locate it within the top twenty or so sites. You can also search by state. For example, you could type cd rates nj for yields in New Jersey (NJ)
Over the next few months, the stock market and bond market will probably continue this current give and take. Since the banks also know it is a back and forth, give and take, they probably won’t respond with greater online CD Rates. I think it will take the FOMC to increase Fed Funds to drastically affect CD rates. That may not happen for another 9-months. Keep in mind that short-term rates will probably move up speedier than longer-term rates, eventually leaving us with a flat or nearly flat yield curve. If at some point the curve inverts again (as it did in 2006/2007), I would extend your terms on your certificates. An inverted curve usally means lower rates are around the corner. Yet, I think we are in for a drawn-out time of low rates. The economy isn’t improving. Everytime they mention a greenshoot, data comes out that it in reality was a brownout.
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