BET ON CDs MATURING IN THREE TO SIX MONTHS

September 30, 1991

With roughly $100 billion in CDs maturing this month (the peak
month for rollovers), savers find themselves in a real bind. On the
one hand, CD yields are now at their lowest levels since rates were
deregulated a decade ago. On the other, yields on money-market
accounts, U.S. Government money funds and Treasury bills don't look
any better.
Your best move? Stick with CDs maturing in three to six months now
and be prepared to shift into longer-term certificates by spring.
Reason: interest rates typically rise as economic recoveries gain
momentum. In addition, CD rates, which usually move in cycles that
last no longer than 31 months, have been falling since April 1989. So
rates could bounce up soon.
While you're waiting for the rebound, you need not settle for the
skimpiest yields on short-term CDs. The six-month CDs listed in the
table on page 21, for example, offer about the same rate as the
average 2 1/2-year CD and only 0.66 points less than the average
five-year CD.
If you are not confident that yields will rise, you can hedge your
bet by staggering your CD maturities. For example, if you have a
$10,000 CD coming due, you might invest half in six-month CDs and put
the rest in 2 1/2- and five-year maturities. That way, you will have
$5,000 to roll over by spring to take advantage of any spurt in
rates. But if rates fall further instead, you'll still have another
$5,000 in CDs earning their original higher rates.

CHART: NOT AVAILABLE
CREDIT: Veribanc, Bank Rate Monitor
CAPTION: THE BEST SAVINGS YIELDS IN THE U.S.

HOLE YARDS PAR R1 R2 R3 R4
OUT
HOLE YARDS PAR R1 R2 R3 R4
IN
Eagle (-2)
Birdie (-1)
Bogey (+1)
Double Bogey (+2)