The Fed has begun its two-day FOMC meeting. The FOMC statement is scheduled to be released at 2:00pm EDT Wednesday. Also at that time, the Fed is scheduled to release its federal funds rate projections and its quarterly economic projections. Then at 2:30pm, Fed Chair Janet Yellen is scheduled to hold a press conference.
No rate hike is expected at this meeting. The main question will be whether this year’s low inflation numbers will have affected the Fed’s outlook for the federal funds rate. We may see this in the federal funds rate projections. Based on these projections and from Fed Chair Janet Yellen’s press conference, we may get a better idea about the likelihood of a December rate hike.
One outcome from the FOMC meeting that’s widely anticipated is the announcement of a program to reduce the Fed’s balance sheet which will reverse the quantitative easing (QE) that took place during the zero-interest rate years. An important reason that the Fed implemented QE was to suppress longer-term interest rates. Thus, reversing QE should have the opposite effect and push up longer-term interest rates.
Will the start of the Fed’s balance sheet reduction program raise deposit rates? The balance sheet reduction has been expected for much of this year, and long-dated Treasury yields have actually fallen this year. The start of the balance sheet reduction may help increase long-term rates a little bit, but I doubt we’ll see a repeat of the Taper Tantrum of 2013. That was when Fed Chair Ben Bernanke announced in May 2013 that the Fed was preparing to taper its bond purchases. The markets panicked in a reaction that was known as the Taper Tantrum. The result was that long-dated Treasury yields increased significantly. For example, the day before Bernanke mentioned tapering on May 21, 2013, the 10-year yield was 1.94%. Tapering was officially announced at the December 18, 2013 Fed meeting. By December 26, 2013, the 10-year yield had reached 3.00%.
How did the Taper Tantrum and the rising Treasury yields affect deposit rates? One of the best CD deals since 2011 began in December 2013. That was when PenFed started to offer 5- and 7-year CDs with a 3.04% APY (I now wish I had chosen the the 7-year rather than 5-year). It should be noted that PenFed’s rates were the exception. Nevertheless, 5-year CD rates overall did rise in 2013. Looking at just internet banks, the highest 5-year CD rate in May 3, 2013 was 1.85% APY. On December 20, 2013, the highest 5-year CD rate for internet banks was 2.16% APY.
The anticipation of the balance sheet reduction announcement may have been part of the reason Treasury yields increased in the last week. The rising stock market may be having more of an impact as investors move from safe Treasuries to stocks. All Treasury yields increased from last week except for the 1-month yield which declined 2 bps. The 5-year Treasury note had the largest yield increase, rising 9 bps from last week.
The odds of a December Fed rate hike increased substantially based on the Fed funds futures. The futures now show about a 63% chance of a rate hike, up from about 42% last week. These odds are likely to change dramatically based on the outcome of Wednesday’s FOMC meeting.
- 1-month: 0.97% down from 0.99% last week (0.52% on Jan 3)
- 6-month: 1.19% up from 1.16% last week (0.65% on Jan 3)
- 2--year: 1.40% up from 1.33% last week (1.22% on Jan 3)
- 5--year: 1.84% up from 1.75% last week (1.94% on Jan 3)
- 10-year: 2.24% up from 2.17% last week (2.45% on Jan 3)
- 30-year: 2.81% up from 2.78% last week (3.04% on Jan 3)
Fed funds futures' probabilities of future rate hikes by:
- Sep 2017 - up by at least 25bps: 1.4% up from 0% last week
- Dec 2017 - up by at least 25bps: 63.3% up from 41.9% last week
- Dec 2017 - up by at least 50bps: 2.1% up from 0.8% last week
- Dec 2017 - down by 25bps: 0% down from 0.8% last week
- Jun 2018 - up by at least 25bps: 79.5% up from 59.9% last week
Savings and Checking Account Rates
We had another small surge of rate hikes on savings and money market accounts in the last two weeks. It’s similar to the surge that I noted two weeks ago except that the new rates are higher.
We have a new rate leader which doesn’t have a small balance cap or a large minimum balance requirement. UFB Direct, a division of Bofl Federal Bank, increased the rate on its Money Market Savings by 121 bps to 1.41% APY. This huge increase is the first rate change for UFB Direct’s Money Market Savings in more than four years. The minimum opening deposit is $5k. Click “view details” of UFB Direct’s rate table, and you can see the rate history of UFB Direct’s accounts. The roller-coaster charts don’t give me confidence that the rate leader status will be maintained over the long run.
Other accounts that had rate hikes included CIT Bank’s Premier High Yield Savings (up 5 bps to 1.35% APY for balances up to $100k) and SFGI Direct’s Savings Account (up 10 bps to 1.31% APY). In addition, EBSB Direct introduced a new money market account with the name Money Market Direct that earns 1.39% APY for balances of at least $50k.
SFGI Direct’s account rate history does give me confidence that the account will at least be close to the rate leaders over the long run.
Other institutions to raise their savings and money market rates are way behind the rate leaders. Quorum Federal Credit Union raised its HighQ Savings account rate by 25 bps to 1.10% APY. Bank of Internet USA (division of BofI Federal Bank) increased the rate of its savings account by 44 bps to 1.05% APY and increased the rate of its money market account by 30 bps to 1.05% APY.
Three of the above rate hikes added three new accounts to my 1.25% club. The total number in this club is now 13. This 1.25% club is the group of nationally available checking, savings and money market accounts that have rates of at least 1.25% APY and that are clearly not promotional or temporary. The new three are the SFGI Direct Savings Account, UFB Direct’s Money Market Savings Account and EBSB Direct’s Money Market Direct Account. The other ten in this club include Northern Bank Direct, Sallie Mae Bank, CIT Bank, ableBanking, Self-Help FCU, BankPurely, UFB Direct (UFB Premium Savings), PurePoint Financial, Dollar Savings Direct and Live Oak Bank.
Reward Checking Accounts
Again, there were no changes to my list of nationally available reward checking accounts. Reward checking rates have been slower to respond to the Fed rate hikes as compared to internet savings account rates. Since much of the rates of reward checking accounts are paid for by debit card activity, banks may continue to go slow with rate hikes.
To find the highest reward checking rates and balance caps in your state or nationwide, please refer to our reward checking rate table. If you're new to reward checking, please refer to my blog post, Overview of Reward Checking and Our Reward Checking Table.
Certificate of Deposit Rates
I’m now publishing my CD survey as a separate post. Please refer to my survey of the best CD rates. This recap will focus on banking news of the week and liquid accounts.
CD Deals: I just wanted to include this reminder of a few noteworthy CD deals that are available.
In addition to the new money market account, EBSB Direct came out with a very competitive 30-month CD (2.21% APY). Please refer to this blog post for more details.
Update 9/20/17: This 30-month No Penalty CD from AgFed has ended and is no longer available.
AgFed Credit Union’s 30-month CD rate is much lower (1.85% APY), but it has one big advantage: a no-penalty withdrawal option. As I described in this blog post, this no-penalty feature makes this CD a great place to park funds while you want for those 3% CDs (Let’s hope for a repeat of 2013 at PenFed.)
AgFed’s No Penalty CD is definitely a better deal than Ally Bank’s 11-month No Penalty CD which currently earns 1.50% APY for balances of at least $25k. Balances of $5k to under $25k earn a 1.25% APY. The advantage of Ally is an easy account opening process and easy account management. Please refer to this blog post for more details. CIT Bank is also giving Ally some competition with its 11-month No-Penalty CD which earns 1.45% APY, with only a $1k minimum deposit (see blog post).
The wait continues for those 3% CDs. The highest nationally available 5-year CD rate is currently 2.60% APY at Mountain America Credit Union. The downside with this CD is an early withdrawal penalty of 1-year of interest. If you think there’s a decent chance that you may want to break a CD, Ally Bank’s 5-year CD (2.25% APY for all balances) is a good choice. It isn’t the 5-year rate leader, but its 5-year CD is very competitive when you factor in the mild early withdrawal penalty (150 days of interest). Sallie Mae Bank is giving Ally some competition. Its 5-year CD APY is 2.35%. This CD’s early withdrawal penalty is just slightly larger than Ally’s (180 days of interest). An easy-to-join credit union recently surpassed Sallie Mae Bank for a top 5-year rate with a mild early withdrawal penalty. Signal Financial Federal Credit Union’s 5-year CD earns 2.40% APY, and its early withdrawal penalty equals six months of interest. You can see the effective yields of these CDs when closed early by using the CD Early Withdrawal Penalty Calculator.Rates as of September 19, 2017
Checking/Savings/Money Market Accounts:
- Best Savings Account Rates (Nationwide and by State)
- Best Money Market Rates (Nationwide and by State)
- Best Checking Account Rates (Nationwide and by State)
- Noteworthy Accounts Available Nationwide:
|State Bank of Texas||1.55% ($100k)||Jumbo MMDA - Account review|
|All America Bank||1.50% (up to $35k), 0.50% ($35k+)||Mega Money Market Account - Account review|
|Redneck Bank||1.50% (up to $35k), 0.50% ($35k+)||Mega Money Market Account|
|UFB Direct||1.41% ($5k min)||Money Market Savings - Account review|
|DollarSavingsDirect||1.40% (no min)||Dollar Savings Account - Account review|
|Live Oak Bank||1.40% ($250k max)||Savings Account - Account review|
|EBSB Direct||1.39% ($50k+), 0.20% ($5k+)||Money Market Direct - Account review|
|Self-Help Federal Credit Union||1.37% ($500k), 1.27% ($500)||Money Market - Account review|
|United Bank (MA)||1.36% ($500k max, guaranteed for 6mo)||Advantage Money Market, Not available in all states, Account review|
|CIT Bank||1.35% (up to $100k), 1.30% ($100k+)||Premier High Yield Savings - Account review|
|Salem Five Direct||1.35%||eOne Savings, for new customers only Account review|
|Signal Financial Credit Union||1.35% ($25k, enrollment in Premium Bundle)||Premium Money Market - Account review|
|EverBank||1.31% (1yr intro rate) 0.86% ongoing rate||MMA - Account review|
|SFGI Direct||1.31%||Savings account - Account review|
|Synchrony Bank (formerly GE Capital Retail Bk)||1.30%||High Yield Savings - Account review|
|Nationwide Bank||1.30%||Online Savings - Account review|
|Sallie Mae Bank||1.30%||MMA - Account review|
|BankPurely||1.30% ($1 min)||SavingPurely - Account review|
|ableBanking||1.30% ($250 min)||Money Market Savings - Account review|
|PurePoint Financial||1.30% ($10k min)||Online Savings - Account review|
|UFB Direct||1.30% ($25k+), 0.20% ($100)||Premium Savings - Account review|
|The Palladian PrivateBank||1.30% (6mo intro rate) 1.10% blended APY||Savings Account - Account review|
|Northern Bank Direct||1.26% ($250k max)||Money Market - See review|
|BBVA Compass||1.25% ($10k min)||ClearChoice MMA Promo - Account review|
|McGraw-Hill Federal Credit Union||1.25% ($75k), 1.10% ($20k),1.00% ($5k) (guaranteed through 8/31/17)||Ascend Account - Account review|
|EverBank||1.21% (1yr intro rate) 0.71% ongoing rate||Checking - Account review|
|Incredible Bank||1.21% ($2.5k), 0.05% ($250k+)||IncredibleBank Savings - Account review|
|Popular Direct||1.21%||Popular Direct Plus Savings - Account review|
|Barclays||1.20%||Online Savings - Account review|
|GS Bank||1.20%||Online Savings Account - Account review|
|Radius Bank||1.20% ($2.5k min)||Radius High-Yield Savings - See review|
|Ally Bank||1.20%||Online Savings - Account review|
|Capital One||1.20% ($10k+), 0.60% (up to $10k)||360 Money Market - Account review|
|American Express Bank||1.15%||High Yield Savings - Account review|
|My e-BAnC by BAC Florida Bank||1.15%||Super Saver - Account review|
|Discover Bank||1.15% (no min)||Online Savings - See review|
|FNBO Direct||1.15%||Online Savings|
|MyBankingDirect||1.15% ($5k+), 0.25% (less than $5k)||Earn >More Money Market|
|SmartyPig||1.15% ($10k min), 1.05% (less than $10k)||SmartyPig Savings - Account review|
|Nationwide Bank||1.15% ($10k), 1.00% ($1)||Nationwide Member Checking Account|
|Connexus Credit Union||1.15% ($100k), 1.00% ($50k,) 0.75% ($20k)||MMA - active chk required|
|Northpointe Bank||1.12%||Statement Savings - Account review|
|Alliant Credit Union||1.11% ($100 min)||High-Rate Savings - See review|
|Northeast Bank||1.10%||Pearl Money Market Promo, new customers - Account review|
|Dime Savings Bank||1.10%||Dime Direct Money Market, new money - Account review|
|iGObanking.com||1.10% ($25k min)||MMA, New accounts and new money only, Account review|
|Chevron Federal Credit Union||1.10% ($250k+), 1.00% ($2.5k+)||MarketEdge Savings|
|Quorum Federal Credit Union||1.10%||HighQ Savings|
|Pacific National Bank||1.06%||Money Market Deposit Account - See review|
|AloStar Bank of Commerce||1.05%||Savings account - Account review|
|Bank of Internet USA||1.05%||Smart Money Market|
|Bank of Internet USA||1.05%||Smart Savings|
|Discover Bank||1.01% ($100k min), 0.95% ($2.5k)||MMA - See review|
|iGObanking.com||1.00%||iGOsavings - Account review|
|MySavingsDirect||1.00%||MySavings Account - Account review|
|UFB Direct||1.00% ($20k min)||UFB Savings - Account review|
Reward Checking Accounts:
- Noteworthy Accounts Available Nationwide:
|Northpointe Bank||5.00% (up to $10k), 0.10% ($10k+)||UltimateAccount - Account review|
|Consumers Credit Union||4.59% (up to $20k)||Rewards Checking - debit card and $1k credit card requirements|
|Consumers Credit Union||3.59% (up to $15k)||Rewards Checking - debit card and credit card requirements|
|One American Bank||3.50% (up to $10k), 0.25% ($10k+)||Kasasa Cash - Account review|
|Consumers Credit Union||3.09% (up to $10k)||Rewards Checking - debit card with NO credit card requirements|
|Evansville Teachers Federal Credit Union||3.00% (up to $15k), 0.00% ($15k+)||Vertical Dividend Checking - Account review|
|Lake Michigan Credit Union||3.00% (up to $15k), 0.00% ($15k+)||Max Checking|
|Great Lakes Credit Union||3.00% (up to $10k), 0.10% ($10k+)||Ultimate Checking|
|Security State Bank||3.00% (up to $10k), 0.25% ($10k+)||Kasasa Cash - Account review|
|Partner Colorado Credit Union||3.00% (up to $10k), 0.50% ($10k+)||High Interest Checking|
|American Bank & Trust||2.51% (up to $10k), 0.25% ($10k+)||Kasasa Cash|
|Industrial Bank||2.50% (up to $15k), 0.25% ($25k+)||Kasasa Cash|
|Capital Educators Federal Credit Union||2.50% (up to $10k), 0.20% ($10k+)||High Yield Checking|
|New Buffalo Savings Bank||2.27% (up to $35k), 0.2497% ($35k+)||Kasasa Cash - Account review|
|Bellco Credit Union||2.25% (up to $25k), 0.25% ($25k+)||Boost Interest Checking - Account review|
|Main Street Bank||2.25% (up to $25k), 0.25% ($25k+)||Kasasa Cash - Account review|
|Altra Federal Credit Union||2.25% (up to $15k), 0.50% ($15k+)||A+ Checking|
|Coastal Credit Union||2.25% (up to $10k), 0.10% ($10k+)||Go Green Checking - Account review that includes companion Go Green MMA|
|Georgia Bank Company||2.15% (up to $25k), 0.40% ($25k+)||Kasasa Cash - Account review|
|TruStone Financial Credit Union||2.02% (up to $20k), 0.10% ($20k+)||TruRate Checking - Account review|
|BankFirst||2.02% (up to $10k), 0.15% ($10k+)||Kasasa Cash|
|Finex||2.018% (up to $25k), 0.20% ($25k+)||Axcess Rewards Checking, Premier Account (formerly First New England Federal Credit Union)|
|XCEL Federal Credit Union||2.01% (up to $25k), 0.03% ($25k+)||Kasasa Cash Checking|
|Bay State Savings Bank||2.01% (up to $20k), 0.25% ($20k+)||Kasasa Cash - Account review|
|Legence Bank||2.01% (up to $10k), 0.25% ($10k+)||Kasasa Cash|
|5Star Bank||2.00% (up to $25k), 0.15% ($25k+)||Kasasa Cash Checking Account review|
|Country Bank||2.00% (up to $20k), 0.25% ($20k+)||Kasasa Cash Checking Account review|
|Elements Financial||2.00% (up to $20k), 0.10% ($20k+)||High Interest Checking - Account review|
|MainStreet Bank||2.00% (up to $15k), 0.25% ($15k+)||Kasasa Cash - Account review|
|Blue Federal Credit Union||2.00% (up to $15k), 0.25% ($15k+)||Extreme Checking (up to 4% w/account relationships) - Account review|
|All America Bank||2.00% (up to $10k), 0.50% ($10k+)||Ultimate Rewards Checking|
|United Educators Credit Union||2.00% (up to $10k), 0.25% ($10k+)||Kasasa Cash|
|KS StateBank||1.95% (up to $25k), 0.50% ($25k+)||Check PLUS - Account review|
|Connexus Credit Union||1.75% (up to $25k), 0.25% ($25k+)||Xtraordinary Checking|
|First Tech Federal Credit Union||1.58% (up to $10k), 0.16% ($10k+)||Dividend Rewards Checking|
|MemoryBank||1.50% (up to $250k)||EarnMore Interest Checking - Account review|
|Superior Choice Credit Union||1.50% (up to $30k)||AMP Checking|
|Bank of Internet USA||1.25% (up to $150k), 0.00% ($150k+)||Rewards Checking|
|Heritage Bank||1.25% (up to $25k), 0.10% ($25k+)||eCentive Account|
|ABCO Federal Credit Union||1.01% (up to $25k), 0.10% ($25k+)||Rewards Checking|
|Community Bank of Raymore||1.01% (up to $10k), 0.20% ($10k+)||Kasasa Cash|
|Community Bank of Pleasant Hill||1.01% (up to $10k), 0.20% ($10k+)||Kasasa Cash|
|First American Bank||1.00% (up to $15k), 0.21% ($15k+)||Everyday Rewards Checking|
|Bank of Blue Valley||1.00% (up to $10k), 0.10% ($10k+)||$1k/month debit card req (formerly Ultimate Checking)|
Certificates of Deposit:
- Best CD Rates (Nationwide and by State)
- Best IRA CD Rates (Nationwide and by State)
- Survey of the Best CD Rates (Nationwide and Local)
Bank Account Alternatives - NOT FDIC Insured
|Duke Energy PremierNotes||1.41% rate for $50K+||Duke Energy PremierNotes review|
|Ally Financial Demand Notes||1.15% rate for $50k+|
|Ford Interest Advantage||1.15% rate for $50k+||Ford Interest Advantage review|
|Vanguard Prime Money Market Fund||1.12% 7-day yield|
|Fidelity Money Market Fund||0.97% 7-day yield||reviews on Fatwallet|
|Vanguard Tax-Exempt Money Market Fund||0.73% 7-day yield|
|Fidelity Municipal Money Market Fund||0.49% 7-day yield|
Post Publication Edits
9/20/2017: United Bank (MA)’s Advantage MMA added.
9/20/2017: Removed the mention of AgFed's 30mo CD
9/21/2017: Synchrony Bank's High Yield Savings rate raised.