New FIFO deposits identified that fluctuate with the Fed

Estimated 10 Percent of the Balances of CDs Over 3 Years with Less Than $100K Will Disappear With Every 1 Percent Increase in the Fed Rate

A new analysis from Market Rates Insight (MRI,, a leading research firm that tracks rates for deposits, loans, and fees for financial institutions, has identified CDs with the terms of three years or more and, less than $100K, as the most sensitive to fluctuations in the Fed effective rate.  Historically, this type of CDs was the first to gain balances when the Fed moved its rate down, and the first to lose balances when the Fed moved its rate up.

The analysis by Market Rates Insight examined the relationship between the Fed effective rate and balances of liquid accounts and term accounts of less than 3 months, 3-12 months, 1 to 3 years, and over 3 years, under and over $100,000.  The analysis covered a period of six years, from the 1st quarter of 2004 to the fourth quarter of 2009. According to the new study, CDs with a term of three years or more, and of less than $100K, are more responsive than any other type of deposit product to Fed rate fluctuations. 

The analysis found that CDs of over three years and less than $100K have a very strong negative relationship to Fed rate movement.  This means that when the Fed rate moves down, the balances for these CDs go up and visa versa.  For example, in March of 2004, the Fed effective rate was 1 percent, and the national balance for this product was $70 billion. In December of 2006, the Fed effective rate was 5.25 percent, and the balances for this type of CD went down to $41 billion. When the Fed effective rate went down again to 0.12 percent in December of 2009, the balances for these CDs went up again to $104 billion.

“Now is the time for institutions to start developing rollover and conversion plans for this type of CDs,” said Dan Geller, Ph.D. Executive Vice President at Market Rates Insight. “It is inevitable that the Fed will increase its rate at some point, and when this happens, institutions should expect to lose about 10 percent of this product’s balance for every 1 percent increase in the Fed rate.”

The complete analysis can be viewed on the Market Rates Insight website at this location:


About Market Rates Insight

For more than two decades, Market Rates Insight (MRI) has been helping subscribers price with precision by providing banks, thrifts, credit unions, and other financial institutions with accurate market intelligence on deposits, loans, and fees. MRI uses deposit surveys, mortgage and consumer loan surveys, fee and feature studies, scanned ads, new product alerts, and market share and money fund reports to give subscribers the intelligence they need to profitably react to emerging trends. MRI’s products include customized, web-enabled market research tools that report on rates, as well as online searchable databases, gauges, alerts, and dashboards that aggregate key client data to provide real-time views on how they stack up against market competitors.

Market Rates Insight is located in San Anselmo, California. For more information, see


Dr. Dan Geller

Market Rates Insight


Tom Woolf

Market Rates Insight

(415) 259-5638


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