Rates on Bank Deposits Are Nearly Zero. Here Are Some Options.

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If you’re annoyed at your bank, join the crowd. Banks are awash in pandemic deposits—your money—and raising lending rates (including mortgages) as the Federal Reserve raises rates. But yields on the average big-bank savings account are at a barely visible 0.13%, providing scant protection against rising inflation.

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Here’s the reality of deposits. Banks raise yields to attract deposits—they have little direct relation to, say, federal-funds rates. Banks make money by lending, and profits swell as rates rise and deposit yields hug the ground. Right now, big banks have no incentive to raise deposit rates.

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There are caveats. Some banks may give you a marginally higher rate for a bigger deposit. Once the Fed stops raising, depository yields often rise for two or three quarters, says David Konrad, managing director of equity research at Keefe, Bruyette & Woods: “The banks get the benefit of the lag early on, but the consumer kind of catches up at the back end.”

What can you do? Online-only banks, with lower overheads than conventional banks, offer yields of 1.5% and 2%. Online competition is sharp, and they’ve raised rates recently. Online-only banks include established names, such as Ally and Goldman Sachs’ Marcus, and neobanks like Chime Financial, a fintech. Online-only banks tend to offer higher rates than neobanks. Both have FDIC insurance.

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If you can tolerate tying your money up for a few months to five years or more, there are always certificates of deposits. Here, too, you’ll score higher rates online versus at bricks-and-mortar banks. Marcus is offering 2.3% for a one-year online CD, 3.2% for a five-year. That’s better, but it still can’t beat inflation.

Next Week

Monday 8/8

American International Group,

Barrick Gold,
BioNTech, Dominion Energy,

International Flavors & Fragrances,

Take-Two Interactive Software,
and Tyson Foods report earnings.

Tuesday 8/9

Coinbase Global,

Emerson Electric,

Norwegian Cruise Line Holdings,
Ralph Lauren, Sysco,

TransDigm Group,
and Welltower announce quarterly results.

Nielsen Holdings convenes a special shareholder meeting to seek approval to be acquired by a private-equity consortium led by Elliott Investment Management. The proposed deal values ​​the TV-ratings firm at $16 billion, including debt.

The National Federation of Independent Business releases its Small Business Optimism Index for July. Consensus estimate is for a 89 reading, slightly less than June’s 89.5, which is the lowest reading since early 2013. Small-business owners expecting better business conditions over the next six months were at a net negative 61% in June, the lowest level recorded in the 48-year history of the survey.

The Bureau of Labor Statistics reports preliminary employee compensation and productivity data for the second quarter. Unit labor costs are expected to increase at a seasonally adjusted annual rate of 6.7%, while productivity is seen decreasing by 4.1%. This compares with a 12.6% jump and 7.3% decrease, respectively, in the first quarter.

Wednesday 8/10

Walt Disney releases fiscal-third quarter 2022 results.

The BLS releases the consumer price index for July. Economists forecast an 8.7% year-over-year rise, compared with a 9.1% jump in June. The core CPI, which excludes volatile food and energy prices, is seen increasing 6.1%, versus a 5.9% gain previously. The 9.1% reading was the highest since 1981, while the core CPI is off slightly from the recent peak of 6.5% in March. The S&P 500 index jumped 9.1% in July, its best month since November 2020, in anticipation of a less hawkish Federal Reserve on the assumption that inflation has peaked.

Thursday 8/11

The BLS releases the producer price index for July. Consensus estimate is for a 10.4% year-over-year increase, less than June’s 11.3%. The core PPI, which excludes food and energy prices, is expected to rise 7.7%, down from 8.2%.

Brookfield Asset Management,

Cardinal Health,

Illumina,

ResMed,
and Rivian Automotive hold conference calls to discuss quarterly results.

Friday 8/12

Broadridge Financial Solutions reports earnings.

The University of Michigan releases its Consumer Sentiment Index for August. The consensus call is for a 53 reading, slightly more than July’s 51.5. The index is near its record low, as inflation remains top of mind for consumers.

Write to Elizabeth O’Brien at [email protected]

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Credit: www.marketwatch.com /

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