Investors are getting more options to lock in 4% yields on certificates of deposit (CD), even as the Federal Reserve holds interest rates steady:
On Wednesday, the Fed decided to keep the federal funds rate between 3.5% and 3.75%. Looking ahead, market participants are pricing in a rate hike later this year:
The latest move comes from Synchrony Financial, which raised the annual percentage yield on its 12-month CD by 30 basis points to 4% last week:
Three other institutions — Bread Financial, Capital One, and Sallie Mae — also boosted their yields this quarter:
As of June 26, 639 banks marketed rates above 3.5% on a one-year, $10,000 CD, according to S&P Global Market Intelligence:
However, BTIG is seeing a different trend in high-yield savings accounts, which saw no rate moves last week but had multiple decreases this quarter:
“The cuts to Savings Rates, to us, signal that very near-term deposit competition is relatively light,” analyst Vincent Caintic said:
The rise in CD rates also increases expectations that banks' net interest margins will be pressured for the next 12 months:
“Deposit costs are squeezing margins at US banks and there is no near-term relief in sight,” S&P Global's Tariq wrote:
