Savings and CD rates were flat last week with both average rates and top rates hardly moving at all.

Savings Rates

Average savings rates remained exactly the same as the previous week at 1.36% APY. The top rates also remained the same with Southern Community Bank's Ready Saver 2% APY Savings Account leading the pack of non-promo rates. For promotional rates, Everbank remains on top with their 3-month introductory bonus rate of 2.25% APY. After the three-month period, the rate drops down to 1.26% APY for a blended one year APY of 1.51% APY. Banks that dropped their rates include:

CD Rates

The average 1-year CD remained steady at 1.61% APY. First City Bank continued to hold the top spot with a 1.80% APY CD. First City Bank is in bad financial shape and has been operating under a FDIC Cease and Desist Order since 10/09. Tennessee Commerce Bank maintained the second spot at 1.70% APY.

The average 3-year CD rate also remained steady at 2.47% APY. Like last week, the top spot is occupied by USAA Federal Savings Bank, which requires a minimum deposit of $175,000. The next highest rate is Acacia Federal Savings at 2.65% APY and a $500 minimum deposit.

The average 5-year CD rate is the only one that changed at all from the previous week. It rose a miniscule 1 basis point from 3.16% APY to 3.17% APY.

USAA has the top rate at 3.31% APY. Everbank continues to have the second highest rate at 3.30% APY. versus the 3.39% APY it was offering last week.

Which Direction Interest Rates?

The prevailing wisdom is that interest rates will be heading higher sometime in the near-term so it's better to invest in short-term CDs or keep cash liquid with money markets and savings rates. But as an article in Bloomberg points out, there is no evidence of inflation on the horizon and if anything, deflation is a bigger concern.

"Demand for U.S. government bonds is increasing. On average, the Treasury received $3.21 in bids for each dollar sold at 10- year auctions this year, compared with $2.63 in 2009 and $2.41 from 2004 through 2008, according to data compiled by Bloomberg.

“Part of what’s frustrated bond vigilantes has been that economic data has ratified the notion of modest growth and continued declining inflation,” said Wan-Chong Kung, a money manager who helps oversee $89 billion at FAF Advisors in Minneapolis, the asset-management arm of U.S. Bancorp. "

Deflation or very low inflation means the Fed can keep rates low for an extended period of time. As the chart below shows, the spread between 1 year and 5-year CDs is at a 2 year high, with a 5-year CD paying 1.50% more per year. The 3.17% APY average yield of a 5-year CD may look pretty good if rates don't budge much in the next couple of years.

Great Florida Bank is offering a 6-month promo CD that yields 1.40% APY. That's the best 6-month cd rate according to the BestCashCow rate tables as of April 14, 2010.

A minimum balance of $10,000 is required in order to receive the promo rate. The CD can be opened nationally online or in one of their branch locations. The bank operates 29 branches in the Miami area.

In addition to the 6 month promo rate, the bank is also offering competitive rates on several other CD terms. They include:

12-Month CD: 1.65% APY

18-Month CD: 2.05% APY

While these are competive CD rates, it may make more sense to invest in a savings or money market account instead of a short-term CD. Many believe rates are on the rise (although we have yet to see that on BestCashCow) and savings and CD accounts offer higher rates with greater flexibility and liquidity. For example, Everbank has a promotional offer for new money that pays out a guaranteed 2.25% APY for the first three months after the account is opened. The rate then drops to 1.26% APY. But after six months, this account would pay about the same amount as the 6-month CD with the ability to withdraw money. The only risk with a savings or money market rate is that the bank could drop rates lower. That's possible but getting increasingly unlikely as the economy improves.

Safety and Soundness

Great Florida Bank was established in 1984. The bank currently has a Bauer Rating of 1 out of 5 stars (Troubled) for its safety and soundness. Many Florida banks are having trouble as the real estate crash has hit Florida especially hard. The bank's stock (Nasdaq: GBLB) is trading at $.82, down from a high of $18 in 2007. The bank is FDIC insured so if you deposit money be sure to stay below FDIC insurance limits.

Another week, another drop in CD rates. As the Fed wishes, so it gets. All terms of CD rates were down and some of the top rates fell from their perch this week as the trend was down, down, down. As we've seen lately, longer-term (5-year) CDs fell less than their shorter-term cousins and as a result the spread between 5-year and 1-year CDs hit a new record high.

The average 1-year CD dropped by 3 basis points from 1.39% APY to 1.36% APY. The top rate also dropped from 2% last week to 1.80% APY from First City Bank. First City Bank is in bad financial shape and has been operating under a FDIC Cease and Desist Order since 10/09. Southern Commerce Bank has the next highest rate at 1.75% APY but as the BestCashCow rate tables show, it also has some financial problems.

If you stay below FDIC limits you will not lose your principle, but if a bank goes under the FDIC or the bank that assumes deposits has the ability to reset these deposit rates. Thus, a high rate CD can be reset to a lower rate. The assuming bank does provide customers with the option of withdawing funds in that case. With rates so low though, a rate reset wouldn't be devestating. It's depositors who opened CDs several years ago when rates were above 5% who really suffer when the bank fails and rates are reset down to 2% or lower.

The average 3-year CD rate was the big loser this week, falling 6 basis points from 2.58% APY to 2.52% APY. USAA Federal Bank Savings Bank cut their rate, leaving Bank United in the top spot with a 2.75% APY CD. Bank United is not yet rated because it is a relatively new banking entity, having emerged from the ashes of the old, failed BankUnited. The new bank has been recapitalized and appears to be in much better financial shape than it predecessor.

The average 5-year CD dropped by only 1 basis points to 3.19% APY. The top rates have also remained steady or even increased slightly..

USAA continues to have the top 5-year CD rate at 3.41% APY but it does have that $175,000 minimum balance. Everbank has the second highest rate at 3.39% APY up from 3.33% APY last week. One thing to note about Everbank is their penalty for breaking a CD early. According to their terms:

"This penalty will be equal to one-fourth of the total interest that would have been earned on the principal balance of the account if funds had not been withdrawn prior to the maturity date." On a 5-year, 60 month CD, that's 15 months of interest.

The spread between average savings rates and 3-year CD rates has trended down over the past four weeks, mainly because 3-year CDs have dropped faster than savings account and money market rates. The opposite is happening with 5-year CDs, which have remained firm. The spread between 1-year CDs and 5-year CDs hit another record high last week. You can now earn on average 1.55% APY more in a high yield 5-year CD than a high yield 1-year.