High Long-Term CD Rates and Future Interest Rates

The Pacific Mercantile Bank has some good rates on CDs with terms of one year and longer. A 2-year CD has the rate of 4.92% APY. An 18-month CD has the rate of 4.81% APY. Below is the full list. All have a minimum deposit requirement of $1K.

Term        APY
12 month    4.66%
18 month    4.81%
24 month    4.92%
36 month    4.97%
60 month    5.23%

The bank has 8 California branches. However, it looks like you can open a CD from any state by phone or online/mail.

Planning for Declining Interest Rates

One nice CD feature that I noticed from the account disclosure details is the ability to make 3 deposits into your account before maturity. A certificate of deposit with this feature can be very useful when rates may be peaking. From yesterday's news on December's Fed meeting, interest rates may peak this year and start coming down. If that's the case, a high-rate 5-year CD this year might make sense. However, there's always a chance that rates may continue to rise. By putting the minimum into a high-rate 5-year CD that allows additional deposits, you can wait and see how interest rates move. If rates do fall, you can then make additional deposits into the high-rate 5-year CD. The Self-Help Credit Union CDs also have this feature.