Historical CD Rates

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Historical CD Rates By Year

1993, 1994, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012

Historical CD Rates By Term

6 Mon, 1 Year, 2 Year, 3 Year, 4 Year, 5 Year

In May of 2005 we pulled average historical CD rate information from our database for three different 10-year windows. We have now added average rates by term or by year. Historical rates are as of 7/31/12.

When analyzing historical CD rates, it is interesting to see what hindsight conclusions we can make. Our data only goes back to 1993, so certainly we don’t have rates back to the beginning of time, but the data might reflect our current economic models better (or at least the inflation hawks we’ve been “blessed” with). Our historical CD rate information is current as of July 31, 2012.

First, many people just like investing in short-term CDs. Investing in 6-month CDs would have returned an average rate of 3.76%. If you opted for 1-year CDs then the average rate would have been 4.09%. At this point, CD rates and 1-year rates are well below the historical averages. Currently we are seeing rates around 0.50% to 1.50%. Rates from 1994 to 2000 and 2006 to 2007 were above the averages. Rates from 1993, 2001 to 2005, and 2009 to present were below.

You would have fared much better if you invested with a longer-term perspective. Historical CD rates for 3-year CDs have been 5.093%, 4-year CDs have been 5.207%, and 5-year CDs have been 5.405%. That is up to a full percentage point difference. This actually makes a lot of sense. Banks and Credit Unions typically offer better rates for longer-term CDs because the investor is taking more risk that the economy will move against them.

Currently, Banks and Credit Unions are faced with an inverted yield curve. This means the short-term treasuries have a higher yield than the longer-term. Historically, a drop in rates has followed an inverted yield curve. As a result, Banks and Credit Unions are anticipating this drop and don’t want to offer too high of a rate for the long-term CDs.

If you have a nice laddered portfolio already created, I would stick with it. If you don’t, now is a great time to create one. However, history doesn’t always repeat itself; it may be prudent to keep a balanced approach to your CD investing.