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Some Long Term CDs Trending Down

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Although 6-month and 1-year CDs are trending up, some of the long-term CDs are trending down. For example, early in this month Netbank's 3-year CD reached 5%. Currently, only Netbank's 5-year CD is at 5%. Its 3-year CD is now at 4.90% APY. Similar changes have occured at UmbrellaBank and GMAC Bank.

GMAC GMAC Umbrella Umbrella
11/18 11/28 11/18 11/28
----- ----- ----- -----
3 Month 4.20% 4.20% 4.20% 4.30%
6 Month 4.35% 4.45% 4.40% 4.50%
9 Month 4.38% 4.50%
12 Month 4.70% 4.75% 4.70% 4.80%
18 Month 4.75% 4.80% 4.75% 4.70%
2 Year 4.80% 4.85% 4.80% 4.65%
2.5 Year 4.85% 4.60%
3 Year 4.85% 4.90% 4.90% 4.50%
4 Year 4.90% 4.92% 4.90% 4.65%
5 Year 5.05% 5.00% 5.00% 4.75%

The long-term CD changes at GMAC Bank have been small. However, the change at UmbrellaBank has been substantial. Umbrella's 1-year CD now has a higher rate than any of the longer term CDs.

Perhaps banks are anticipating the Fed will be ending its rate hikes at some point next year. As was apparent when the Fed released its minutes from its last meeting, 2006 will likely not see the number of rate hikes as were seen in 2005.

At some point, you'll want to change from short-term CDs to long-term CDs before the rates start to decline. If you keep waiting for those 6% or higher CDs, you may end up missing the boat.
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