Investors are shying away from low-yielding CDs

LOS ANGELES — The amount of money in bank certificates of deposit has fallen to a four-year low, a casualty of record low interest rates that have lasted much longer than many savers may have expected.

There still is $1.06 trillion in what the Federal Reserve classifies as small-denomination CDs, meaning those of $100,000 or less. But the small-CD total at banks and thrifts is plummeting at a fast rate, and now is back to 2006 levels.

About $100 billion has flowed out of CDs this year alone, and the runoff has totaled about $400 billion since the end of 2008, according to data compiled by the Fed’s regional bank in St. Louis.

The money isn’t vanishing, of course. Much of it has stayed at the banks, but has been shifted to basic savings accounts or money market deposit accounts.

Understandably, many Americans don’t want to lock up their cash in CDs at current depressed interest rates, so they’re keeping a record $5 trillion in liquid accounts that typically pay even less than CDs.

The average money market deposit account pays interest at a 0.41 percent annualized rate, according to market research firm Informa Research Services, which surveys 3,500 banks, thrifts and credit unions weekly.

By contrast, the average one-year CD now yields 0.90 percent. The average six-month CD yields 0.63 percent.

The Fed has been holding its benchmark rate between zero and 0.25 percent since the end of 2008, foiling savers who thought that rates might be rising by now.

Many banks have responded to the Fed’s rock-bottom rate by continuing to lower CD yields over the last year.

So savers planning to roll over maturing CDs have been offered less and less for their cash.

The average one-year CD yield has dropped more than half a percentage point in the last 12 months, from 1.43 percent in mid-June 2009, according to Informa.