Bond yields are falling but not CD interest rates


CDs are a safe place to park extra cash

One result of the Federal Reserve’s signal last week that it’s making progress on curbing inflation immediately showed up in the bond market. The yield on the Treasury’s 10-year note fell below 4% for the first time since August.

If you purchased bonds a few weeks ago, you’re still earning good interest. Not only that, as bond yields fall the value of your bonds go up.

But if you’re just now looking for a safe place to park some cash, certificates of deposit (CD) generally pay more in interest and for shorter durations. Synchrony and Everbank both offer an interest rate of 5.50% on a nine-month CD. Synchrony requires no minimum deposit but Everbank requires an opening deposit of at least $1,000.

Fulbright pays even more – 5.75% – on a nine-month CD with a minimum deposit of $1,000.

While Treasury bonds are backed by the “full faith and credit of the U.S. government,” CDs are just as safe, just as long as the issuing financial institution is covered by the Federal Deposit Insurance Corporation (FDIC). Should the institution fail, depositors are made whole, up to $250,000.

Good options to consider

After reviewing 33 financial institutions, ConsumerAffairs researchers picked seven banks as best, based on different criteria. They are:

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