Last week saw a surge in yields throughout most of the Treasury bond market. This is a sign of hope for bank rates in general, but in particular for longer-term CD rates.
So far this year, bond yields have seemingly defied logic in much the way bank rates have — they started 2010 at extremely low levels, and then just proceeded to get lower. For bond yields at least, things took a sharp turn for the better last week.
Most of the action was in the intermediate-to-long area of the yield curve, i.e., 3-years and out. This is why these moves in the bond market might translate more to CD rates than to bank rates in general. Improbably, short-term Treasury yields actually fell last week, but 3-year, 5-year, and 10-year Treasuries all moved up and now have impressive yield gains to show for the month of March.
While savings account rates and money market rates have more in common with short-term Treasuries, 3-year and 5-year CD rates are more likely to move in concert with Treasuries of similar terms.
If you are shopping for bank rates, and especially if you are rolling over a CD, this means two things:
- First of all, take a fresh look at the 3-5 year range. It is still a tough call to commit to such long terms when CD rates are generally low, but the more these CD rates start to rise above short-term rates, the more attractive making that commitment becomes.
- Check rates from different banks. Banks do not respond to changes in the market all at the same time, and the more market rates are moving, the more likely you are to see significant differences among bank rates.
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