Top 2-year CD rates tread water waiting for the Fed
Until the Federal Reserve finally opts to raise rates, we may be stuck at about the same top 2-year CD yield we saw at the start of the year.
Paying 1.52% APY since July, E-Loan is the current 2-year leader among nationally available bank CDs.
It’s just a hair below the 1.55% that Citizens State Bank offered from September 2014 through the first week of January.
But when Citizens State stopped offering its CDs nationally, the top 2-year yield sank to 1.35% APY and disappointingly stalled there until returns began increasing in May.
Recovering most of that lost ground is welcome news for a term whose leading rate not only was mired below 1.30% APY for close to two years between 2012 and 2014, but was at its post-recession low of 1.20% APY just a year and a half ago.
The rate offered by E-Loan is part of a dramatic new strategy that has moved the online bank from rates that didn’t even register in our CD rankings up to the very top spot not only for 2-year CDs, but across the 1-, 3-, 4- and 5-year terms as well.
E-Loan is an online operation of Popular Community Bank, which has almost 50 branches throughout New York, New Jersey and South Florida.
As the mainland division of Puerto Rico’s Banco Popular, Popular Community’s deposits (and those made through E-Loan) are fully insured by the FDIC, as are all bank CDs we feature on Interest.com.
According to banking experts, Popular Community is a healthy bank whose commercial lending business is growing rapidly, requiring it to become more aggressive in courting deposits to fund those loans.
TOP 2-YEAR CD RATES: Nationally Available Bank Deals
|Colorado Federal Savings Bank||1.45%||$5,000|
|AloStar Bank of Commerce||1.40%||$1,000|
|California First National Bank||1.40%||$5,000|
|Triumph Savings Bank||1.35%||$1,000|
|First Internet Bank of Indiana||1.31%||$1,000|
|Barclays Bank||1.30%||No minimum|
|Ally Bank||1.29%||No minimum|
Of course, savers fortunate enough to live in the right place or work for the right employer have options to outearn the top national rate by shopping for local deals.
We’re aware of almost 20 credit unions and community banks currently offering 2-year yields that not only beat E-Loan’s 1.52% but pay as much as 2.25% APY for savers who qualify.
In addition, one credit union — USAlliance Federal Credit Union — has two competitive offers that are available to savers anywhere in the country.
It's paying 1.61% APY on a standard 24-month certificate, or 1.51% if you prefer an option to bump up your return if rates increase.
USAlliance membership is available to select residents of Massachusetts and Connecticut, those who work for certain employers in New York, or anyone nationwide who makes a donation to an affiliated charitable organization.
TOP 2-YEAR CD RATES: Credit Union, Community Bank Deals
|Bank||States||Term (in months)||APY|
|Peoples Transport Federal Credit Union||New Jersey||24||2.25%|
|Self Reliance New York Federal Credit Union||New York||24||2.07%|
|Select Federal Credit Union||Texas||24||2.00%|
|First Federal Credit Union||Iowa||25||2.00%|
|Bent River Community Credit Union||Iowa, Illinois||28||2.00%|
|Four Corners Federal Credit Union||New Mexico, Colorado, Utah, Arizona||24||1.96%|
|University of Iowa Community Credit Union||Iowa, Illinois||23||1.80%|
|FORUM Credit Union||Indiana||23||1.75%|
|Idaho Central Credit Union||Idaho, Nevada||24||1.75%|
|Cedar Falls Community Credit Union||Iowa||25||1.75%|
|Veridian Credit Union||Iowa, Nebraska||25||1.70%|
|Pioneer Federal Credit Union||Idaho||25||1.65%|
|Chicopee Savings Bank||Massachusetts, Connecticut||22||1.61%|
|Greater Springfield Credit Union||Massachusetts||24||1.61%|
|North Platte Union Pacific Employees Credit Union||Nebraska||24||1.61%|
|Westmark Credit Union||Idaho||23||1.60%|
|Transit Employees Federal Credit Union||Washington, D.C.||24||1.55%|
Of course, all of these yields dwarf the national average among the nation’s banks.
According to our weekly survey of banks and thrifts, 24-month certificates are currently averaging 0.44% APY.
At its post-crisis worst, the 2-year average dropped to 0.36% APY in December 2013 and hit that low again in July 2014.
Compare that to February 2007, before irresponsible mortgage lending put the economy in a tailspin and the national average return for 24-month CDs was 3.78% APY.
With the Federal Reserve stepping in to rescue the economy by dropping interest rates in December 2008, savers’ yields have suffered for almost seven years as the economy has taken its time building up to full capacity again.
At its September meeting, the Fed once again disappointed savers by concluding that the economy is not yet throwing off all the necessary signs to support a rate hike.
Various members of the committee have repeatedly stated they fully expect a rate hike by the end of the year. But with just two meetings left — one late this month and the other in mid-December — time is running short.
It feels like a tortuously long wait to see CD yields regain even a bit of their past glory. But to get back to national 2-year certificates paying anything close to the 3% to 4% yields we enjoyed before the 2008 financial crisis, wait we must.
Meanwhile, we’ll keep you posted on the best-paying options here.