This bank just lifted its CD yield. Here’s where you can nab 4%
The forecast for Federal Reserve rate cuts is looking bleak this year, but there’s a silver lining for savers: A few banks are offering competitive yields on cash instruments. The specter of inflation continues to haunt consumers as the Iran war keeps fuel prices high. The current national average price of gasoline weighs in at $4.459 per gallon, up from $3.174 per gallon a year earlier, according to AAA. April’s consumer price index rose at a one-year pace of 3.8%, the highest since May 2023. These higher prices are hurting the prospects for rate cuts this year. In fact, fed funds futures trading suggests a nearly 50% likelihood that there will be a rate hike in December, according to the CME Group’s FedWatch . Savers closely watch the Fed’s rate decisions, as they tend to influence yields on money market funds, certificates of deposit and other cash instruments. “With the market now anticipating at least one Fed Fund Rate hike by December 2026, it’ll be interesting to see how online banks will alter their deposit rate offerings,” wrote BTIG analyst Vincent Caintic in a report this week. His team pointed to two crosscurrents underlying the institutions’ decisions: the banks’ views of rates going forward and the institutions’ loan growth prospects. Loan growth is a major factor, as the interest banks make from lending money out can help them cover the cost of raising yields on CDs and savings accounts. Bread Financial’s hike Bread Financial raised its annual percentage yield on its 1-year CD to 4%, a gain of 15 basis points from the earlier week. One basis point is equal to one one-hundredth of a percent. “We see this as a combination of three things: accelerating loan growth, a call on rates, and that Bread’s own retail deposits are cheaper than its other sources of funding,” Caintic said in his report. The bank is also in good company: As of Wednesday, Popular Direct is offering a yield of 4.11% on a 12-month CD. Investors can also find yields of 4% or more if they’re willing to consider other maturities that are slightly off from a year. Consider that Sallie Mae has a 13-month CD with a 4% APY, while LendingClub offers 4.15% on its 11-month CD. Though these rates make CDs an attractive place to hold short-term cash, investors should remember that these yields ultimately won’t keep up with inflation for the long term. Banks can also revisit their yields once these CDs mature, so the rate you get at a renewal may not be as rich as what you initially picked up. Expect these CD rates to stick around for a little while, Caintic said. “Going forward, we broadly do not expect our online banks to cut deposit rates further,” he said. “Any future cuts that do appear would imply, in our view, slower than expected loan growth.” CNBC’s Michael Bloom contributed reporting.
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