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Inflation Rate Surpasses Highest Paying CD Rate

SAN ANSELMO, Calif.-A new analysis has found that as of February 2011, the annual inflation rate surpassed the highest paying five-year CD rate. The gap between the two widened in April when the annual inflation rate climbed to 3.16%, and the highest paying five year CD stood at 2.40%-a negative yield of 0.76 basis points, according to from Market Rates Insight (MRI).

MRI reported this is the second time in the last 10 years that the annual interest rate surpassed the highest yield offered on any type of five-year CD. The first time it occurred was between January and July of 2008, when in July the annual interest rate peaked at 5.60%, and the highest yield on a five-year CD stood at 3.80%, the company said. Among the different types of five-year CD, the highest yielding CD in April of 2011 was the Callable CD at 2.40%, MRI reported. This type of certificate allows institutions to call in the CD during established call dates, which institutions are using to hedge against deflation rather than inflation.

"It is unusual to see a premium paid on Callable CD during inflationary period," MRI said. "For example, during the last time the annual inflation rate surpassed CD rates in mid 2008, the highest yielding CD type was Relationship CD at 3.80%, whereas Callable CD was priced lower at 3.32%.

"From a pure numbers prospective, CD yield are now in negative territory compared to inflation," said Dan Geller, EVP at Market Rates Insight. "However, for many depositors, the piece of mind that comes with an insured deposit is a greater incentive than the difference in the yield."

For additional information: www.marketratesinsight.com.

 

Three Major Banks Team To Create P2P Solution

CHARLOTTE, N.C.-Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. has debuted a person-to-person payments service that lets customers send money to each other with an e-mail address or mobile phone number.

The service, which will be offered through a joint venture called clearXchange, will pull funds from a customer's online checking account and send it to another person's account, according to American Banker, an affiliate of Credit Union Journal.

The banks are offering the service as a test for free, though they could decide to charge customers for it later on. Other banks could join the service as well, according to the three banks involved.

Several P2P payments services, including eBay Inc.'s PayPal, Fiserv Inc.'s ZashPay and CashEdge Inc.'s Popmoney, already allow consumers and businesses to send money to each other via email address or mobile phone number. PayPal, traditionally viewed as a competitor to banks, requires consumers to set up a separate account and register a bank account with it to use it, while ZashPay and Popmoney are mainly offered through banks' websites.

Credit card network Visa Inc. earlier this year also announced a service aimed at competing with PayPal that lets customers send money from one Visa card to another through banks that issue the network's cards.

The bank's announcement comes at the same time Wescom Central Credit Union, Pasadena, Calif., has signed with PayPal to offer P2P payment services to credit unions. Wescom Resources Group, the credit union's CUSO, has integrated the PayPal Send Money for financial institutions into its MemberEdge Mobile solution.

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