Long term bond rates have fallen the past two weeks because of the uncertainty in the equity markets worldwide. The markets first reacted negatively to the Federal Reserve tapering their monthly purchases and have also fallen on a very weak manufacturing report released this past Monday.

The Fed provided so much liquidity to the equity markets the past several years that changing these policies sent stock market prices lower across the globe. Now that the Fed is “taking the punch bowl away,” investors are selling equities and heading for the exits. The Dow fell more than 5 percent in January, its worst performance in several years. A safer place right now for your money is in good old fashioned deposit accounts. Don’t expect much of a return since rates are low but at least your principal is safe with the FDIC’s protection as long as you keep your deposits below $250,000.

The best money market account rates and savings account rates are unchanged this week as long term bond yields fell. The best money market rates this week are at 0.90 percent and the best savings rates are at 1.00 percent this week. The best CD rates this week are slightly above those rates at 1.04 percent with an APY of 1.05 percent.

Savings rates, money market rates, and CD rates are currently low and will remain near current levels until the Federal Reserve increases the fed funds rate. The new Fed “Chairperson,” Janet Yellen, took over the reins from Ben Bernanke this past Monday. Janet Yellen and Ben Bernanke’s policies are pretty much aligned, so analysts don’t expect any change in the Fed’s current policies.

We don’t expect any across-the-board changes in deposit rates until sometime in 2015, which is when the Fed is expected to increase the fed funds rate. There will be some banks and credit unions increasing rates sometime in 2014, but don’t expect any large increases from current rate levels.

Best Savings Rates at 1.00% APY

The best savings rate in our national rate database this week is from First Trade Union Bank at 1.00 percent with an APY of 1.00 percent. First Trade Union Bank has a minimum opening deposit of $2,500 for a savings account. This bank’s savings rate is considerably higher than the average savings rates this week, including the national average jumbo savings rate.

We have several banks in our database offering savings rates at 0.90 percent, just below First Trade Union Bank’s rate. Barclays Bank, GE Capital Retail Bank, CIT Bank, and The Palladian PrivateBank are all offering a rate of 0.90 percent. Barclays Bank has no minimum opening balance for a savings account, GE Capital Retail Bank’s minimum opening deposit is $500, The Palladian PrivateBank has a minimum of $10,000, and CIT Bank’s minimum is $25,000.

National Average Savings Rates/Money Market Rates at 0.46%

The current national average savings/money market rate on account balances of at least $10,000 is at 0.46 percent. The average rate on account balances of at least $25,000 is at 0.54 percent and the average for account balances of at least $50,000 is at 0.59 percent.

In the FDIC’s Weekly National Average Rate and Rate Caps Survey, the national average savings rate is currently at 0.06 percent.

Best Money Market Rates at 0.90%

The highest money market rates in our database this week are at 0.90 percent. We have two banks offering that rate, Sallie Mae Bank and Union Federal Savings Bank. Sallie Mae’s minimum opening balance for a money market account is $0 and Union Federal Savings Bank’s minimum opening balance is $2,500.

The second top money market rate in our database this week is from EverBank at 0.86 percent. EverBank’s minimum opening balance for a MMA is $1,500. The third highest rate this week is from three different banks, Ally Bank, Mutual of Omaha Bank, and GE Capital Retail Bank at 0.85 percent.

The minimum opening balance for a money market account at Ally Bank’s minimum is $0, Mutual of Omaha Bank’s minimum opening balance is $5,000 and GE Capital Retail Bank is $10,000.

Higher Interest Rates in the Future

While we have pretty much given up hope for across-the-board increases in interest rates this year, 2015 will bring us higher rates. Last December, the Fed polled its members and 12 of the 17 members believe there will be a need for “policy firming,” (aka: a higher fed funds rate) in 2015.

The forecasts for the fed funds rate varies from a low of 1.25 percent all the way up to 4.25 percent. Where the rate actually ends up in 2015 is anybody’s guess but interest rates are moving higher.

A 1.25 percent fed funds rate will send the top savings rates and money market rates above 2.00 percent and perhaps as high as 2.50 percent. 1 year bank CD rates will also move above 2.00 percent and possibly as high as 2.50 percent.

A 4.25 percent fed funds rate would send interest rates on variable rate accounts above 5.00 percent. 1 year CD interest rates would also move above 5.00 percent. The last time we saw CD rates that high was just before the recession in 2007 when Washington Mutual was so desperate to shore up their deposit reserves, they were offering 1 year CD rates at that rate.

Below is a list of the highest bank savings account rates and money market account rates for the month of November. As you can see the best rates haven’t changed over last month’s best rates. We won’t see higher interest rates until the Federal Reserve Open Market Committee (FOMC) votes to increase the federal funds rate.

A higher federal funds rate will happen when the unemployment rate falls from the current level of 7.2 percent down to 6.5 percent. October’s employment report will be released this morning at 8:30 AM. Thanks to the government shutdown and debt ceiling fight the unemployment rate is expected to increase to 7.4 percent.

The unemployment rate won’t fall to 6.5 percent until April or May of 2014 so we won’t see higher savings rates, money market rates and CD rates until next year. We will have to wait until the summer of 2014 for higher bank interest rates, but for now here is a list of the highest rates available.

Highest Savings Account Rates November 2013

• The Palladian PrivateBank Savings Rate 1.00%
• GE Capital Retail Bank Savings Rate 0.90%
• CIT Bank Savings Rate 0.90%
• Barclays Bank Savings Rate 0.90%
• Ally Bank Savings Rate 0.86%
• American Express Bank Savings Rate 0.85%
• FNBO Direct Savings Rate 0.85%
• Colorado FSB Savings Rate 0.85%
• Discover Bank Savings Rate 0.75%
• Capital One 360 Savings Rate 0.70%
• First Trade Union Bank Savings Rate 0.70%
• Heartland Bank Direct Savings Rate 0.70%
• Bank of Internet USA Savings Rate 0.61%
• First Internet Bank of Indiana Savings Rate 0.60%

Highest Money Market Account Rates November 2013

• Sallie Mae Bank Money Market Account Rate 0.90%
• EverBank Money Market Account Rate 0.86%
• Ally Bank Money Market Rate 0.86%
• GE Capital Retail Bank Optimizer Plus Rate 0.85%
• Mutual of Omaha Bank Money Market Rate 0.85%
• First Internet Bank of Indiana Money Market Rate 0.80%
• ableBanking, a division of Northeast Bank Rate 0.80%
• Bank of Internet USA Money Market Rate 0.75%
• Discover Bank Money Market Account Rate 0.70%
• VirtualBank Money Market Rate 0.65%
• giantbank.com Money Market Rate 0.60%
• AloStar Bank of Commerce Rate 0.60%

You can always find a list of the best savings rates, money market rates or CD rates by searching our database of rates at MonitorBankRates.com.

For several months now, long term bond yields and mortgage rates moved higher while savings rates haven’t budged at all. 10 year bond yields increased from a low point of 1.62 percent in early May to the current level of just under 3.00 percent. The steep increase of 10 year yields practically doubling caused the quickest spike in 30 year mortgage rates ever.

During this time, the best savings rates available haven’t increased at all and remain at 1.00 percent. One factor that might change this is a change in monetary policy by the Federal Open Market Committee (FOMC). The Committee is scheduled to meet next week and set the course for future policy.

Will The FOMC Increase the Federal Funds Rate?

The federal funds rate, which is at a current targeted range of zero percent to ¼ percent, isn’t expected to be increased by the Committee. Another policy that the FOMC embarked on years ago, called quantitative easing (QE), was designed to force long term bond rates and mortgage rates lower.

The FOMC is currently on their third round of easing known as QE3 which involves the purchase of $40 billion a month in mortgage-backed securities and $40 billion a month in long term bond yields. Many analysts believe the FOMC will announce a paring back of their purchases. Even the hint of this happening is the cause of long term bond yields and mortgage rates have spiked higher.

Deposit Interest Rates Driven to Record Lows

While the FOMC has been very successful at forcing mortgage rates and bond yields lower, their policies have also driven deposit rates to record lows. About a year ago, the FOMC acknowledged this but also shrugged it off by saying that low interest rates is helping asset prices increase on business and home values.

Tell that to retirees who don’t own a business, have downsized to a smaller home and are trying to live off interest income on deposit accounts. The current national average savings account rate/money market account rate this week is at 0.45 percent ($10,000 balance) with the highest savings rates at 1.00 percent, just more than double the average.

When Will Savings Rates Move Higher?

Even if the FOMC announces a tapering of their purchases, savings rates and money market rates won’t move much higher. Long term CD rates that have already increased will probably move slightly higher but short term CD rates won’t budge at all. Rates on these types of accounts won’t increase until the federal funds rate is increased.

The Committee has stated they will increase the federal funds rate when the nation’s unemployment rate falls below 6.5 percent. I wouldn’t expect a 6.5 percent unemployment rate until early spring 2014. When the federal funds rate is increased, banks will follow with increasing savings/money market rates and short term CD rates will probably happen sometime in late spring of 2014.

During the month of June, long term bond yields soared as investors dumped bonds fearing an end to quantitative easing by the Federal Reserve. The funny thing is the Fed didn’t say they were going to end quantitative easing so the bond market is getting ahead of itself. While bond yields moved higher, savings rates and money market rates haven’t budged at all.

Average Savings Rates and Money Market Rates

The national average savings rate/money market rate on account balances of at least $10,000 remains at 0.47 percent. The FDIC national average bank savings rate also is unchanged at 0.07 percent. Average deposit rates on account balances of at least $25,000 remain unchanged at 0.63 percent and average rates on account balances of at least $50,000 are unchanged at 0.66 percent.

Long Term Bond Yields Soar in June

Long term bond yields moved considerably higher in June. Below is a chart of closing yields on June 3rd and closing yields on June 26th.

• 3 year yield 0.50% – 0.69%
• 5 year yield 1.03% –  1.45%
• 7 year yield 1.53% – 1.98%
• 10 year yield 2.13% – 2.55%
• 20 year yield 2.92% – 3.27%
• 30 year yield 3.27% – 3.58%

As you can see yields are moving sharply higher with intermediate bond term yields moving the most.

Best Deposit Rates in June

Below are lists of the best savings rates and best money market rates in the month of June. These rates are pretty much unchanged from the best rates available last month though we did have a new leader with the best savings rate in our database this month. The Palladian PrivateBank tops our savings list with a rate and APY of 1.00 percent.

Best Savings Rates in June

• The Palladian PrivateBank Rate 1.00% APY 1.00%
• Barclays Bank Rate 0.90% APY 0.90%
• FNBO Direct Rate 0.85% APY 0.85%
• Colorado FSB Rate 0.85% APY 0.85%
• Ally Bank Rate 0.84% APY 0.84% APY 0.84%
• Discover Bank Rate 0.80% APY 0.80%

Best Money Market Rates in June

• EverBank MMA Rate APY 0.89%
• Mutual of Omaha Bank MMA Rate 0.85% APY 0.85%
• GE Capital Retail Bank MMA Rate 0.85% APY 0.85%
• Ally Bank MMA Rate 0.84% APY 0.84%
• Able Banking MMA Rate 0.80% APY 0.80%

Whether you’re comparing deposit rates or loan rates, you can always find the best rates by searching our database at MonitorBankRates.com.

We didn’t see any big changes in average money market account rates or savings account rates this week. The best savings rates and money market account rates also remain unchanged. Both average rates and the best rates available will remain at current levels until the Federal Open Market Committee (FOMC) votes to increase the federal funds rate.

A higher fed funds rate isn’t possible until the unemployment rate falls from the current level of 7.5 percent to below 6.5 percent. The FOMC has stated this in many meetings the past year. The FOMC has also said they don’t think the rate will fall below 6.5 percent until late 2014 but I believe it will happen sooner.

Lower Unemployment Rate Will Cause Interest Rates to Increase

Since the beginning of 2013, the unemployment rate has fallen from 7.9 percent down to 7.5 percent, an average drop of 0.1 percent a month. If the rate continues to fall at that level, we could see the rate at 6.5 percent in May of 2014 – about four to six months sooner than the FOMC expects. At that point, the FOMC will start increasing the fed funds rate and banks will follow with higher money market rates and higher savings rates.

Current national average savings/money market rates increase for higher account balances. The current national average money market/savings rate on account balances of at least $10,000 is at 0.47 percent. Account balances of at least $25,000 earn a rate of 0.67 percent on average. Account balances of at least $50,000 earn a rate of 0.67 percent on average.

Federal Fund Rate Increase

The increase in the fed funds rate will happen quickly since the current rate, at near zero percent, is accommodating in order to spur economic growth. A more neutral position for the fed funds rate would be at 1.00 percent to 2.00 percent, depending on the pace of economic growth and the inflation rate.

The higher the rate of GDP growth and the higher the inflation rate, the faster the Fed has to increase rates. By the end of 2014, the fed funds rate will probably be in the 2.00 percent to 3.00 percent range. At that point, banks will increase savings rates/money market rates to the same level.

Current Savings/Money Market Rates

• EverBank MMA 1.01% APY
• CIT Bank Savings Rate 1.00%
• Barclays Bank Savings Rate 0.90%
• GE Capital Retail Bank MMA Rate 0.85%
• Mutual of Omaha Bank MMA Rate 0.85%
• Colorado FSB Savings Rate 0.85%
• FNBO Direct Savings Rate 0.85%
• Seacoast Commerce Bank MMA Rate 0.85%
• Ally Bank Savings Account Rate 0.84%
• Ally Bank Money Market Rate 0.84%