It's Like Money In The Bank!

Struggling banks, desperate for money, are ratcheting up CD rates, which many healthy banks feel compelled to match. You can find one-year CDs with yields over 4% and five-year CDs paying in the neighborhood of 5.12%.

Such plump yields put Treasuries with similar maturities to shame. One-year Treasuries were yielding just 2.19% while five-year issues averaged 3.21%. The advantage in yield is more than enough to compensate for the tax advantage that Treasuries have. Investors pay full tax on CD interest while interest from Treasuries is exempt from state and local income taxes.

The yield advantage at banks is because investors are willing to forgo yield for the safety of the Treasury. You can shop for the highest yielding bank CDs at www.bankrate.com.

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