The current state of the economy is to blame as to why high yield CDs are becoming harder to find these days. In general, the interest rate is determined by a slew of factors but the most influential one is the rate set by the Federal Reserve. The Federal Reserve has the responsibility of taking steps to help ensure the stability of our economic infrastructure. One of the tools they utilize is the short-term interest, which gets tweaked according to market conditions. The short-term interest rate affects the cost it will take banks to borrow money from other banks. When the economy is healthy, interest rates go up to fend off inflation. When the economy is slowing down, like during a recession, the Feds lower the interest rates to stimulate more big business in hopes of a trickle down affect.
Currently the U.S. economy is in a recession and the short term interest rates have been lowered. This is great news for those who are in the position of borrowing money, as the banks are lowering the rates it charges consumers to borrow money. But what is good for the borrower, does not necessarily help the investor as the interest rate for deposits has also been lowered.
High yield CDs are becoming harder to find because the Federal interest rate is at its lowest point and banks cannot afford to pay out too much profit on earnings as they will not be able to properly balance their own books. As the economy steadies, expect to see the options for high yield CDs flourish.
For years diversifying your investments with a high yield CD was an easy tactic for investors. All you would have to do was stroll to your local bank branch or conduct a search on the web for “high yield CDs” and dozens of options with healthy interest rates were quickly provided. However, trying to locate a high yield CD now is more like searching for a needle in a haystack.