The Fed, Interest Rates and Bond Yields June 15, 2013
Interest rates on deposit accounts and bond yields are stable this week, no big moves in either interest bearing assets. Several weeks prior to this week we saw long term bond yields move higher as the markets bid up bond prices which lowers yields. Bond prices were bid higher on concerns the Federal Reserve would announce an end to quantitative easing.
The Fed meets next week to discuss monetary policy but I believe the Fed won't announced any changes to their current round of quantitative easing. The Fed has been buying $45 billion a month in long term bonds to keep long term interest rates low. The Fed's purchases hasn't had any affect on savings account rates, money market account rates or CD rates.
The Fed and Deposit Rates
Deposit rates are low because the Fed has kept their key interest rate, the fed funds rate, in a targeted range of zero percent and one quarter percent. When the Fed starts increasing the fed funds rate deposit rates will move higher but that won't happen until sometime next year. For now the best savings rates and money market account rates are just below 1.00 percent.
Here are lists of current deposit rates on savings accounts and money market accounts along with current U.S. Treasury yields: