New Market Rates Insight Analysis Reveals Short-Term Bank Deposits Are Now in Negative Territory Yielding Net Loss for Depositors
Latest Study Indicates 12-month CD Opened in January 2009 Has Return of -1.13% When Adjusted for Inflation
San Anselmo, CA, February 20, 2010 --(PR.com)-- A new analysis from Market Rates Insight (MRI, www.marketratesinsight.com), a leading research firm that tracks rates for deposits, loans, and fees for financial institutions, found that term deposits that were opened in 2009 and matured in December 2009 or later are yielding net negative return when adjusted for inflation. November 2009 marked a turning point between a deflation of -0.18 percent to inflation of 1.84 percent
The findings also point to a growing concern among depositors about the impact of higher inflation on the buying power of their money. For example, a 12-month CD of $10,000 obtained in January 2009 at the national average rate of 1.59 would have matured in December 2009 with a net negative return of -1.13 percent. This means that the buying power of this $10,000 deposit was reduced to $9,887 when it matured in December. This decline in buying power is a reflection of the increase in the Consumer Price Index (CPI) from January to December 2009 as measured by the Bureau of Labor Statistics.
The latest analysis by Market Rates Insight shows that the reduction in short-term deposit is supported by data from the FDIC, which reports that balances of deposits of one-year or less have dropped $284 billion in the first nine months of 2009. This is a reduction of 14 percent in the total balances for deposits of one-year or less despite the fact that total deposits have gone up by $65 billion during the same period. Deposit balances for long-term deposits (over one year) remained practically flat during the same period.
“The connection between fear of inflation and consumer behavior is clear,” said Dan Geller, Ph.D. Executive Vice President at Market Rates Insight. “If net interest rates on deposits stay in negative territory for too long, we will start seeing a shift of balances from deposits to investment.”
The complete analysis can be viewed on the Market Rates Insight website at this location: http://www.marketratesinsight.com/docs/sa2.18.10.pdf.
About Market Rates Insight
For more than two decades, Market Rates Insight (MRI) has been helping subscribers price with precision by providing banks, thrifts, credit unions, and other financial institutions with accurate market intelligence on deposits, loans, and fees. MRI uses deposit surveys, mortgage and consumer loan surveys, fee and feature studies, scanned ads, new product alerts, and market share and money fund reports to give subscribers the intelligence they need to profitably react to emerging trends. MRI’s products include customized, web-enabled market research tools that report on rates, as well as online searchable databases, gauges, alerts, and dashboards that aggregate key client data to provide real-time views on how they stack up against market competitors.
Market Rates Insight is located in San Anselmo, California. For more information, see www.marketratesinsight.com.
Contact:
Dr. Dan Geller
Market Rates Insight
415-448-8813
Dan.Geller@MarketRatesInsight.com
Tom Woolf
Market Rates Insight
(415) 259-5638
tom.woolf@marketratesinsight.com
###
The findings also point to a growing concern among depositors about the impact of higher inflation on the buying power of their money. For example, a 12-month CD of $10,000 obtained in January 2009 at the national average rate of 1.59 would have matured in December 2009 with a net negative return of -1.13 percent. This means that the buying power of this $10,000 deposit was reduced to $9,887 when it matured in December. This decline in buying power is a reflection of the increase in the Consumer Price Index (CPI) from January to December 2009 as measured by the Bureau of Labor Statistics.
The latest analysis by Market Rates Insight shows that the reduction in short-term deposit is supported by data from the FDIC, which reports that balances of deposits of one-year or less have dropped $284 billion in the first nine months of 2009. This is a reduction of 14 percent in the total balances for deposits of one-year or less despite the fact that total deposits have gone up by $65 billion during the same period. Deposit balances for long-term deposits (over one year) remained practically flat during the same period.
“The connection between fear of inflation and consumer behavior is clear,” said Dan Geller, Ph.D. Executive Vice President at Market Rates Insight. “If net interest rates on deposits stay in negative territory for too long, we will start seeing a shift of balances from deposits to investment.”
The complete analysis can be viewed on the Market Rates Insight website at this location: http://www.marketratesinsight.com/docs/sa2.18.10.pdf.
About Market Rates Insight
For more than two decades, Market Rates Insight (MRI) has been helping subscribers price with precision by providing banks, thrifts, credit unions, and other financial institutions with accurate market intelligence on deposits, loans, and fees. MRI uses deposit surveys, mortgage and consumer loan surveys, fee and feature studies, scanned ads, new product alerts, and market share and money fund reports to give subscribers the intelligence they need to profitably react to emerging trends. MRI’s products include customized, web-enabled market research tools that report on rates, as well as online searchable databases, gauges, alerts, and dashboards that aggregate key client data to provide real-time views on how they stack up against market competitors.
Market Rates Insight is located in San Anselmo, California. For more information, see www.marketratesinsight.com.
Contact:
Dr. Dan Geller
Market Rates Insight
415-448-8813
Dan.Geller@MarketRatesInsight.com
Tom Woolf
Market Rates Insight
(415) 259-5638
tom.woolf@marketratesinsight.com
###
Contact
Market Rates Insight
Tom Woolf
415-259-5638
www.marketratesinsight.com
Tom Woolf
415-259-5638
www.marketratesinsight.com
Contact
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