The third quarter offered stock investors few places to hide, but people who snapped up a certificate of deposit may have locked in great rates. As the third quarter drew to a close, a few banks offering high yield CDs and savings accounts boosted their rates even further, according to a Friday analysis by Stephens analyst Vincent Caintic. Banks that hiked yields in the final stretch of the third quarter include Bread Financial , which is now offering an annual percentage yield of 5.6% for a 1-year CD. Ally Financial also raised its yield to 5% for a 1-year CD. Among the banks in Stephens coverage the average rate on 1-year CDs was 4.99%, a 27-basis point (0.27 of a percentage point) increase from the prior quarter, the firm found. Rates on savings accounts averaged 4.3%, showing a quarter-over-quarter boost of 23 basis points. One basis point equals one-hundredth of a percentage point. Though the Federal Reserve held rates steady in September, policymakers indicated rates would stay higher for longer – and that could pressure banks’ deposit costs, according to a Monday report from Morgan Stanley. “We expect at least one more guide up from bank management teams on deposit betas as the Fed keeps rates higher for longer,” wrote Morgan Stanley analyst Betsy Graseck. “Deposit costs tend to rise until after the Fed cuts rates, and the fundamental drivers of deposit pressure should persist over the next several quarters.” Those factors include competition from money market funds for depositors’ dollars, and lower-yielding CDs repricing at higher rates, she added. The run-up in yields on these products occurs as consumers go through the last of their pandemic-era savings. The Federal Reserve Bank of San Francisco estimates that households accumulated excess savings of about $2.1 trillion by August 2021. That amount dropped off to less than $190 billion of aggregate excess savings by June. The San Francisco Fed forecast that the last of these dollars would be depleted during the third quarter of 2023. — CNBC’s Michael Bloom contributed reporting.
