FNBO Direct savings rate now a 2.40% APY

February 25th, 2009 · No Comments

In yesterday’s e-mail I got another punch in the interest-rate-gut.  This time FNBO Direct is dropping their savings rate to a 2.40% APY.

Enough pennies can really add up

Interest to soon be best measured in pennies?

It’s been less than a month since FNBO’s last interest rate drop, where it went from a 2.80% APY to a 2.60% APY on February 2nd.  I don’t have much in the way of new thoughts on these rate drops beyond wondering how low they’ll get.  I am curious if anyone knows if this is the lowest rate FNBO has ever offered because I know ING Direct is in that position.  It’s pretty depressing to think about.

I guess when banks are lowering their rates multiple times per month even though the federal funds rate hasn’t changed (because its already at or near 0%), then it’s clear that we’re simply waiting for various terms of higher yield previous commitments to expire. I wonder, if we can dig out the rate history for a bank, could we calculate an average lag for how closely it’s trend follows the fed fund rate?  And what the curve’s average distance is from the fed funds rate?   That might be able to tell us when the bank’s rates have hit bottom or how much further they have to fall if the fed funds rate doesn’t go back up.  However, I’m not sure banks don’t change up their strategy for using savings deposits so that analysis might just find no useable pattern.

If I were an optimist, I might be thinking that with rates continuing to drop, it will influence some people to start putting their money back into the market because they’re not earning anything on the cash anyway.   That might help the market bottom out and start a climb back up.  Wishful thinking.

Tags: Savings

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