For those of you who have avoided the loss risks of investing in stocks, bonds, commodities etc. you are all too aware that, for the past couple of years, the interest rates available on 'safe' bank offerings ... savings accounts, money market accounts, Certificates of Deposit etc. ... have been close to zero. However, the rising interest rates that have been taking place in the bond markets over the past couple of months now appear to be translating into higher interest rates being paid by some banks and credit unions on these types of accounts.
On a nationwide basis, GE Capital Bank ( div of General Electric ) and Ally Bank ( div of General Motors ) appear to be offering the highest interest rates on short term money. On a regional / local basis, some individual banks and credit unions are offering even higher interest rates than GE Capital Bank and Ally Bank.
While ~1% interest earnings on short term money isn't anything to 'write home about', it sure beats the ~0.1% interest that most banks and credit unions had been paying !!! And, of course, money placed in savings accounts or CD's has an explicit guarantee against loss of principal, while money placed in money market funds has an implicit guarantee ... something which is definitely NOT the case for money invested in stocks, bonds, commodities, etc.
The major event driving this increase in interest rates appears to be the steady northward march in interest rates offered on 10 year US Treasury bonds ... which the financial gurus consider to be an accurate 'proxy' for most banks' and credit unions' actual costs of funds. From an interest rate of 1.5% a year ago, 10 year Treasury bond rates have risen to 2.77% as of yesterday's market close. Thus banks and credit unions are apparently now deciding that it is 'cheaper' for them to try and attract additional money to make future loans, mortgages etc. from new 'savers' than it is to ( effectively ) borrow money from the US Treasury.



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