Banks keep pumping out low-rate, short-term certificates of deposit despite the fact their customers do not seem to want them, according to a nine-month analysis of the product by Market Rates Insight in San Anselmo, Calif.

"It's puzzling," said Dan Geller, the executive vice president of MRI. "Customers are pulling money out of short-term products, and in response, banks are introducing more short-term products."

Indeed, deposits in short-term CDs, those with maturities of 12 months or less, declined 12% in the first three quarters of this year, to $675 billion, while banks and credit unions introduced 26% more CD products. (Geller is not at liberty to state the exact number of CD products on the market.) "The question is, why make more of what their customers say they don't want?" he said.

The problem is, most banks are not sweetening the deal.

Though the highest-yielding short-term CD is paying 1.82% on a 12-month product, the average short-term CD pays just 60 basis points. Compare that with long-term CDs (36 months or more), which are paying an average of 1.41%. That is hardly a king's ransom, but at least deposits in these products are up by 4%, or $4 billion, to $109 billion.

"Banks should be more attuned to what customers want and how they're voting with their dollars," Geller said. "If there's a decrease in demand for short-term CDs and an increase in demand for long-term CDs, banks should focus on where the demand is."

By comparison, the single one-year fixed annuity that Beacon Research tracks, the Liberty Bankers One, which is comparable to a one-year CD because both its surrender charge and rate term are 12 months, currently pays 1.2%.

Three-year fixed annuities pay an average 1.34%, and as much as 2.3%, which is slightly more generous that what bank CDs are yielding.

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