CD Deposits Surge At 28% Rate, But Slowdown Expected

Higher yields on certificates of deposit are continuing to draw consumer dollars.

The Federal Reserve reported last week that assets in small time deposits are growing at an annualized rate of 28%. The latest figures show deposits grew from $821.3 billion in the first week of January to $859.9 billion at the end of February.

Deposits should climb even further, but not as fast, as investors continue to seek shelter from the still-troubled stock and bond markets, experts say.

Michael T. Vanderpool, a senior vice president of Riverside National Bank, in Riverside, Calif., said CD sales are up, even though the bank has not run any special promotions.

Riverside has seen 12% growth in CDs during the past year, from $52 million in January 1994 to $58 million as of the end of February, with much of the increase coming in the last three months.

"CDs have become a much more viable alternative for our marketplace," Mr. Vanderpool said.

Still, experts predict growth rates may soon slow.

"CDs are plateauing," said Peter Crane, editor of Money Fund Report, a newsletter published by IBC/Donoghue Inc., Ashland, Mass. " He Expects no further surge, unless the Federal Reserve bumps up interest again.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER