They Want to Take You Higher

They’re not just for grandma anymore.

Seeking to attract more baby boomers who may want to hedge their massive bets on the stock market, some banks and thrifts are offering attractive yields on certificates of deposit.

Although CD rates overall have risen only slightly this year, some banks and thrifts are offering rates far above the averages. With rates expected to stay flat for the next few months, this could be a good time to lock in one of the higher CD offerings, some experts say.

“The banks may be appealing to many of the fears baby boomers may have about the highs in the stock market right now--boomers who are looking for a safe place to retreat to,” said Tim Kochis, a certified financial planner in San Francisco. “They’re trying to get some of that money back from the markets and into the banks.”


Banks also are raising more CD money because of increased demand for loans, analysts said.

Rates as high as 5.906% for a one-year CD are surpassing the current 5.36% rate) on a one-year Treasury bill, offering investors some appealing alternatives.

Although Treasuries are exempt from state taxes--a strong plus in California--a CD rate of nearly 6% makes those attractive investments now, analysts said.

Sanwa Bank in Los Angeles in October offered a 14-month CD at 6.00% with a minimum deposit of $10,000. The rate was 6.25% if an investor also opened a direct-depost checking account with Sanwa. The bank said it expects to offer similar deals in the next two months.


Other bargains include one offered by Southern Pacific Thrift & Loan in Los Angeles--a 5.80% rate on a one-year CD with minimum deposit of $5,000. Midwest Savings Bank of DeGraff, Ohio ([800] 686-2052), is offering a 5.90% rate on a one-year CD, but the minimum deposit is $25,000. Sterling Bank & Trust in San Francisco ([415] 658-2888) is offering a 5.92% rate for a six-month CD with a minimum deposit of $500. “People are foolish to stick with their hometown bank when they can easily get a full percentage point more on CDs at another bank,” said Robert K. Heady, publisher of Bank Rate Monitor in Palm Beach, Fla., a newsletter that tracks industry trends.

Longer-term CD rate averages have moved up slightly since the beginning of the year. A five-year CD now averages 5.62%, compared to 5.41% in January, according to the Bradshaw Financial Network, a rate research and publishing firm. Six-month and one-year rates have stayed relatively flat.

What if you don’t want to tie up your money in a CD? Consider a bank money market account. Bradshaw Financial President Martin Bradshaw said there are attractive opportunities now in bank money market accounts, which are liquid and thus allow an investor to withdraw funds at any time. In addition, they too are FDIC-insured. “In most people’s minds, bank money market accounts are considered to have lackluster returns,” Bradshaw said. “But that’s not so. “

On average, money market mutual funds--which are not FDIC insured--offered through mutual fund firms or brokerages offer better rates than bank-insured money market accounts. The current national average yield on bank money market accounts is 2.65%, versus 4.93% for money market mutual funds, Bradshaw said.

But there are exceptions. For example, Pacific Crest Investment & Loan in Agoura Hills ([800] 245-5626) is offering a 5.13% rate on a money market account with a minimum deposit of $5,000. Heritage Bank in Willmar, Minn. ([800] 344-7048), is offering a 5.62% rate on a money market account, but the minimum deposit is $75,000.

“Investors can park money at attractive rates for no particular term,” Bradshaw said. “There’s some liquidity here. You can eat your cake and have it too.”

Interest rate data from Bradshaw’s surveys appear in The Times Sunday Business section.

Times staff writer Debora Vrana can be reached at



California Municipal Bonds

T. Rowe Price & Associates tracks the yields of 20 California municipal bonds and the Bond Buyer Index of 40 national issues.

Five Widely Held California Bonds:


Yield Issue Coupon Maturity 11/22 Friday Calif. general obligation 10-yr (generic) 4.80% 4.80% Calif. general obligation 20-yr (generic) 5.45 5.42 Los Angeles MTA (insured) 5.00% 7/1/17 5.62 5.60 Calif. public works lease rev. 6.00 10/1/14 5.64 5.64 San Fran. airport (insured) 5.65 5/1/24 5.65 5.65


Source: T. Rowe Price & Associates in Baltimore, which manages a $150-million California bond fund


Note: All yields are as of 2 p.m. Friday. Yields are based on institutional trading, retail prices and a survey of California brokers. Yields offered to individual investors will vary.