Yields on certificates of deposit are falling like a brick in the wake of recent moves by the Federal Reserve Board.

Along with CD rates, the flow of funds into time deposits of less than $100,000 continues to spiral down, according to preliminary data from the Federal Reserve.

Most banks have mirrored the Fed's move, by dropping their own rates on long-term CDs and snipping off incentives on shorter-term certificates of deposit, experts say.

Since Feb. 1, rates on the bellwether one-year certificate of deposit have fallen 11%, to 5.12% nationwide on July 19, according to Bank Rate Monitor, a newsletter based in North Palm Beach, Fla.

Surprisingly, long-term CD rates have been falling far faster - by a 2- to-1 margin - than shorter-term rates, said Robert Heady, the newsletter's publisher.

"Banks have been sensing an interest rate fall and built in the drop" in long-term CD rates ahead of the Fed's move, he said. "This time the Federal Reserve actually lagged the market."

He added that "it could be interpreted that banks are expecting another reduction down the road."

Similarly, money trickling into small time deposits fell to an annualized growth rate of 11% the week of July 10 - stronger than in recent weeks, but only half the growth seen as recently as May.

For banks that depend on CDs as a cheap source of funding for loans, the pressure to keep rates competitively high is especially strong right now.

Adams Bank and Trust, Ogallala, Neb., is paying out 5.9% on its one-year CD - one of the highest rates on a certificate of deposit in the country. Adams has had to keep its CD rates high to compete with larger banks in its region.

"We can't substantially lower rates," said Mel Adams, chairman of the $160 million-asset bank. "There's a lot of pressure on us community banks to stay competitive and pay out more."

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