The activity seen in the Treasury yield curve carries over to CD maturities of a similar term. Short-term CD yields continue to fall, by 60 basis points in the past 60 days. Just 8 percent of institutions cut yields on five-year CDs, with an equal amount raising yields as cutting yields. It's just that longer term CDs fell earlier and faster than their short-term CD cousins. With short-term yields falling faster than longer term yields, investors must be cautioned not to alter their investment strategy.
Investors run the risk of locking up too much, for too long, for too little yield.
Those investors who have painstakingly constructed a laddered CD portfolio are now reaping the benefits, as only a portion must be reinvested in the current market, with yields the lowest since 1994. Much as a diversified stock portfolio has protected against the carnage in tech stocks, diversifying a cash portfolio by laddering offers protection from reinvesting the whole bundle when yields are low. What's more, investors still possess a portfolio tailored to their cash requirements. Bankrate's 100 Highest Yields list includes certificates of deposit with yields high enough to more than offset the state income tax exemption on earnings from Treasury securities. Safety of principal is assured, as all institutions listed are FDIC-insured.