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Good news for income-centric investors: Higher yields in the certificate of deposit market will continue through the remainder of 2023. Banks hiked rates on CDs through the last two weeks of July, with the average one-to-12-month rate rising by 11 basis points to 4.6%, according to Morgan Stanley analyst Betsy Graseck. One basis point is equal to one one-hundredth of a percent. The action has been especially fierce for online institutions. “Among the primarily online deposit gatherers ( ALLY , AXP , COF , DFS and SYF ), the average highest CD rate paid increased 2 bps to 4.93%,” the analyst wrote in a report Tuesday. She anticipates that deposit betas – a metric showing the extent to which banks are passing on the Federal Reserve’s rate changes to savers – will continue to rise in the second half of this year. That’s driven by pressure on deposit balances, lagged impacts from the Fed’s latest quarter-point rate hike, and competition from Treasurys and money market funds as interest rates stay high. See below for some of the institutions in Morgan Stanley’s coverage that are also offering attractive rates. Be aware that banks will start to pump the brakes at some point. Graseck noted that over the past two weeks, rates on CDs in the 13-to-36-month range have fallen by 4 basis points. “We also expect banks to continue shortening the duration of their highest CD offers to position for a potential Fed rate cut in 1H24,” she wrote. — CNBC’s Michael Bloom contributed to this report.
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