Traders expect the Federal Reserve could start cutting rates as soon as September, sending returns on cash lower, but a few places still offer yields exceeding 5% to those willing to park their money. To that effect, Marcus by Goldman Sachs recently boosted the annual percentage yield on its 1-year certificate of deposit to 5.15%, reflecting a week-over-week boost of 15 basis points, BTIG found.
One basis point is equal to one one-hundredth of a percent. Marcus' yield hike places it in an exclusive group of financial institutions continuing to offer rates in the 5% range on deposits. Citizens Access and Capital One Financial each offer a 1-year CD that yields 5%, while Sallie Mae offers a 5.
15% APY. Bread Financial is at the top of the heap, with an APY of 5.25% on a 1-year CD.
Though the yields are solid, they likely will not last long. The Fed's rate-hiking cycle, which started in March 2022, had the pleasant side effect of boosting yields on money market funds, CDs, high-yield savings accounts and other cash proxies. The party will start to wind down as rates slip — and investors hiding out in these short-term instruments will see their yields tumble.
"Broadly we still expect online bank deposit rates to decline," said Vincent Caintic, an analyst for BTIG, in a Friday report. "Almost all the banks in our coverage group expect flat to declining balance sheets." Indeed, LendingClub recently slashed its 1-year CD APY to 4.
2%, reflecting a cut of 95 basis points, Caintic fou.