Their returns have practically fallen to zero. The Fed last week cut the interest rate banks charge one another on overnight loans by a half-point to 2.5 percent in an aggressive effort to revive the frail economy. The federal funds rate is now the lowest since John F. Kennedy was president. The Fed has sliced interest rates a full percentage point since Sept. 11, and by a whopping four percentage points since the beginning of the year. The latest cut was the Fed's ninth this year.
Trouble is, today's piddling interest rates have dealt a severe blow to savers.
We're probably looking at the lowest yields in something near 30 years. In Dallas, the yields on a one-year CD have dropped from an average 5.70 percent early last October to a dismal average of 2.79 percent last week. In this strategy, you buy a series of CDs that mature at regular intervals. This enables you to get higher yields without tying up all your money at one low rate. But to the borrowers go the spoils.