Direct CD Deals Summary blog as of 06/28/2024
The top 3 CD deals available as of 06/28/2024 are listed below analyzed with previous data from 06/01/2024.
Information cross referenced from:
1) Deposit Accounts CD rate lists: https://www.depositaccounts.com/cd/
2) CD Valet Standard promos: www.cdvalet.com
3) Deposit Quest Substack: https://depositquest.substack.com/
DISCLAIMER: This summary is not perfect by any means and may contain errors. Please add corrections below. Minimums only mentioned if above $1,000.
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3-month:
1) 5.51% - Total Direct Bank (25k minimum)
2) 5.50%- Shoreham Bank (1K minimum)
3) 5.40% - 2 way tie: Merrick Bank (25k minimum) and Mutual One bank
Analysis:
• Mutual One Bank's rate dropped from 5.65% to 5.40%.
• Total Direct Bank and Shoreham Bank maintained their positions but with slightly reduced rates.
• Merrick Bank entered the top three with a 5.40% rate.
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6-month:
1) 5.55% - Inova FCU ($200 minimum)
2) 5.51% -Total Direct Bank (25K minimum)
3) 5.50% - 5 way tie: Shoreham Bank ($1k minimum), Greenwood Credit union ($1k minimum)Vibrant Credit Union, Flagstar Bank, My Banking Direct($2.5k minimum)
Analysis:
• Inova FCU entered the list with the highest rate of 5.55%.
• Total Direct Bank maintained its position with the same rate.
• The tie at the 5.50% rate now includes a different set of banks.
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1-year:
1) 6.00% - Nano Banc($10k minimum)
2) 5.55% - Paramount Bank
3) 5.44% - Eagle Bank ($1k minimum)
Analysis:
• Significant increase with Nano Banc offering 6.00%.
• Paramount Bank and Eagle Bank entered the list with competitive rates.
• Previous top banks dropped off the list.
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18-month:
1) 5.41% - State Department FCU($10k minimum)
2) 5.25% - 2 way tie: CU of New Jersey, NASA FCU($10k minimum)
3) 5.20% - 2 way tie: State Department FCU, Magnifi Financial($2.5k minimum)
Analysis:
• State Department FCU's rate increased to 5.41%, taking the top spot.
• CU of New Jersey and NASA FCU maintained similar rates.
• New entries include Magnifi Financial.
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2-year:
1) 5.39% - Dover FCU
2) 5.36% - Amboy direct($25k minimum)
3) 5.30% - Charles Schwab Bank ($1k minimum)
Analysis:
• Dover FCU and Amboy Direct maintained their rates and positions.
• Charles Schwab Bank entered the list with a 5.30% rate.
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3-year:
1) 5.75%* - Farmer’s Insurance FCU (Variable Rate* certificate tied to Federal Funds rate effectively FFR + .25% spread) $1k minimum
2) 5.12% - State Bank of Newburg($10k minimum)
3) 5.00% - 3 way tie: Dollar Saving Direct($1k minimum) , Superior Choice CU, Vibrant Credit Union
Analysis:
• Farmer’s Insurance FCU remained the highest, with a variable rate tied to the Federal Funds rate.
• State Bank of Newburg entered with a 5.12% rate.
• Similar banks maintained the 5.00% rate with new entries.
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4-year:
1) 4.70% - 2 way tie: BMO Alto, Community Commerce Bank ($100k minimum)
2) 4.65% - 3 way tie: Credit Human (36-59 Month CD), Raymond Jones Bank ($1k minimum), Central State Bank ($1.5k minimum)
3) 4.60% - Pacific Crest bank ($2k minimum)
Analysis:
• BMO Alto maintained the top spot, now tied with Community Commerce Bank.
• More banks entered the top three with similar rates.
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5-year:
1) 4.86% - Grow Financial FCU ($100k minimum)
2) 4.80% - BMO Alto
3) 4.68% - Advancial CU ($50k minimum)
Analysis:
• Grow Financial FCU entered with the highest rate of 4.86%.
• BMO Alto and Advancial CU maintained their positions.
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General Trends and Observations:
1. Rate Changes: There is a general trend of increased rates in shorter terms (3-month, 6-month, and 1-year CDs compared to June 1, 2024.
2. New Banks: New banks like Nano Banc, Inova FCU, and Grow Financial FCU have entered the lists with competitive rates.
3. Top Rates: The top rates have generally increased for shorter terms but remained stable or slightly increased for longer terms.
Updated Forecast Analysis:
Given the recent developments and the data analysis from the CD rates provided, here's a revised forecast analysis on where CD rates, brokered CD rates, and US Treasury rates are headed:
Current Economic Indicators:
It was initially anticipated that the Fed's first rate cut would be pushed back to early 2025. This expectation has been a driving factor behind the upward pressure on US treasuries and brokered CD rates. However, the Fed's decision to keep the federal funds rate steady in their June meeting, while indicating a definitive rate cut in September 2024, signals a potential shift in the interest rate environment. Cooling inflation indicated by the May CPI report and today's PCE report will give the Fed the cover it needs to cut rates in 2024(if the trend continues). This put the brakes on both US treasuries and brokered CD rates that had been creeping up since the beginning of the year.
US Treasury Rates and Brokered CDs-
Throughout most of 2024, we observed a steady upward trajectory in 5-year(peaking near 4.8% in late April 2024) and 10-year Treasury yields(peaking at 4.7%) This trend contributed to the rise in long-term brokered CD rates, which peaked in late May 2024. 5 year non-callable brokered CD's reached as high as 4.85% during this run up. US Treasury rates have significantly declined since then, suggesting a major cooling off from their previous highs.The 5 year is currently at 4.26% and the 10 year is at 4.25%.
Direct CD Rates-
Banks and credit unions have been slower to adjust their rates in response to these macroeconomic changes. Nevertheless, recent data indicates that short-term CD rates (e.g., 3-month and 6-month CDs) have been rising, reflecting the current high interest rate environment. Long-term CD rates, however, seem to be stabilizing or declining, indicating that we may have reached the peak of the current rate cycle. As this current cycle has shown though, new data could completely turn this prediction upside down.
Forecast for CD Rates:
Given the Fed's steady rate stance in June and the indication of a rate cut later in 2024, we can expect the following trends for CD rates:
1. Short-Term CD Rates: Short-term CD rates are likely to continue rising or hold steady in the near term. This is driven by the current high interest rate environment and banks' attempts to attract deposits with competitive rates.
2. Long-Term CD Rates: Long-term CD rates may have peaked. With US Treasury rates declining from their recent highs, long-term brokered CD rates are also likely to follow suit. If the Fed proceeds with a rate cut later in 2024, we can expect a more pronounced decline in long-term CD rates.
3. Overall CD Rate Trend: Until the Fed implements its anticipated rate cut, nothing is absolutely certain. However, the opportunity to secure ~5% long-term CD rates may be diminishing. Historical patterns suggest that once the Fed begins cutting rates, CD rates will drop significantly across all terms.
Key Considerations:
• Inflation Data (CPI/PCE): If CPI and PCE remain elevated and above the Fed's 2% target, there may be continued upward pressure on rates. However, if inflation data shows a substantial decline, it could accelerate the Fed's decision to cut rates, leading to a quicker drop in CD rates. The May CPI report indicates the latter but the the Fed’s favored “core” PCE price index jumped by 3.0% annualized in April from March, well above the Fed’s target of 2%. However, the May PCE report released today, which was in line with forecasts, supports the expectation for a September rate cut by the Federal Reserve.
• Labor Market: The labor market's performance will also play a crucial role. A cooling labor market could prompt the Fed to cut rates sooner, which would lead to lower CD rates. However, the May 2024 jobs report blows past forecasts and shows the labor market is still quite hot.
• Economic Growth: Any signs of slowing economic growth could influence the Fed's monetary policy, potentially leading to rate cuts sooner than anticipated but there is not enough data to support that the economy is slowing down. The April jobs report showed a cooler labor market with 165,000 jobs created and annualized wage increases of 2.8%. This was seen as a sign of the anticipated slowdown that might prompt the Fed to cut rates. However, the May jobs report along with the three-month averages over the past year have remained steady, indicating an economy growing faster than normal with higher job creation and wage increases, reflecting the ongoing inflationary environment.
Conclusion:
While short-term CD rates are likely to continue rising or hold steady in the immediate future, the peak for long-term CD rates may already be behind us. Investors looking to secure high long-term rates should act quickly, as the window of opportunity is narrowing.
Whether the anticipated rate cut in 2024 is warranted is certainly a question that is up for debate. With inflation still above targets, a hot labor market and an economy that is humming along, the Fed's 2024 rate cut target may be a bit premature. Nevertheless, the anticipated rate cut by the Fed later in 2024 will likely mark a turning point, leading to a significant decline in CD rates across all terms.
Therefore, as history as shown, do not pay much attention to the FOMC fed forecasting tool or even what the fed indicates it is going to do in the future. It is most advisable to monitor inflation and labor market data closely as they will be critical determinants of the Fed's policy decisions and the subsequent direction of CD rates.
