FNBO savings yield drops to 2.60% APY

February 3rd, 2009 · 2 Comments

FNBO Direct sent me another customer service e-mail yesterday.  Their online savings account rate has dropped and is producing a yield of 2.60% APY as of February 2, 2009.

image: http://www.freeimages.co.uk/

image: http://www.freeimages.co.uk/

Now that I’m keeping this blog I can easily see that just a 41 short days ago the yield was 3.25% APY.  Which means the yield has dropped by 0.65% in a little over a month.  (On Dec 23, 2008 it dropped from 3.25% APY to 2.80% APY.)  They say in this recent e-mail:

This change reflects our continued effort to offer you a competitive rate, even as the Federal Reserve rate remains at or close to zero percent.

Which strikes me as kind of a weird statement to make since (a) I’ve never heard of anything called the “Federal Reserve rate” — only a “federal funds rate“.  The latter is the nominal rate the Federal Reserve system tries to target for bank-to-bank lending.  When that rate is low, it makes it cheaper for bank’s to borrow money, which would only be a negative if you were on the lending side.  And (b) the statement indicates that a significant portion of the interest FNBO Direct was paying was due to lending out deposits to other banks on overnight loans.  I guess I had always assumed they put most of your deposit to work using mechanisms with higher interest rate spreads such as loans to customers, loans to businesses of all types, etc.  Basically things that have longer terms.

I wonder if FNBO was paying a rate greater than 18% in 1982 when the federal funds rate was in that range in the early 1980’s?  You can see the history of the fed funds rate on this wikipedia chart.

Tags: Savings

2 responses so far ↓

  1. 1 davmp // 2009.02.05 at 10:19 am

    I just noticed that ING quietly dropped their yield to 2.20% APY for Orange Savings Accounts as of Feb 3, 2009. So even with this drop, FNBO is maintaining their yield lead by 0.40% APY.

  2. 2 FNBO Direct savings rate now a 2.40% APY | Geographic Independence // 2009.02.25 at 3:17 pm

    […] 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 […]

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