Citibank is one of the biggest banks in the world, and people and businesses hold more than a USD trillion dollars of assets there.
Certificates of deposit (CDs) are a type of deposit account used to guarantee the interest rate over a period of time. Investors who do not want to subject their money to market risk purchase CDs. In a rising interest rate environment, investors typically purchase certificates of deposit with maturities of one year or less. Citibank currently offers CDs with maturity lengths of three months to five years. Citibank’s top annual percentage yield (APY) is 0.50 percent for five years. At the time of this writing, the one-year CD currently pays investors 0.10 percent APY.
Most clients in search of CDs want to know that their “safe money” is earning a rate of return at all times. People with a desire to invest in a CD want to know about Citibank’s CD rates. Many investors compare certificate of deposit rates before making the decision to buy a short-term or long-term instrument. They may choose Citibank CDs because the financial institution has a large network of branches and resources.
Citibank Credit Ratings
People who invest in certificates of deposit at Citibank are technically creditors of the bank. Citibank is rated A1 by Moody’s and A by Standard & Poor’s. The bank’s debt outlook is rated from stable to positive by these evaluator firms. In comparison, the U.S. government’s Standard & Poor’s debt rating is AA+ and AAA by Moody’s. The U.S. government’s AAA credit rating was reduced several years ago by Standard & Poor’s because of the country’s mounting debt levels.
An A rating like Citibank’s means that the bank’s perceived ability to repay debt is affected by the economy in which it operates. Citibank is a global financial institution, and the bank is certainly affected by global economic conditions in which it operates. In the United States, Citibank and all lenders face a potential rising interest rate environment. This means that Citibank is likely to pay its lenders more money in the future than it does today.
Inflation and Savings Rates
Investors who purchase certificates of deposit are frequently concerned about the presence of an inflationary environment. In an inflationary market place, consumers pay more money for goods and services. In a sustained low interest rate environment such as the United States, unemployment rates decline and businesses have access to loan funds at reasonable rates. Some economists believe that if interest rates do not rise from current levels, the U.S. may face an inflationary environment once more.
Economists say that the present economic environment in the United States remains deflationary. In other words, the Consumer Price Index (CPI) actually reflects a decline in prices measured by the CPI. Economists report that residents of the country have lived in a deflationary environment for almost 35 years. During this time period, the U.S. stock market as measured by the Dow Jones Industrial Average has risen more than 1,600 percent.
Recently, the Federal Reserve Bank reported that inflation levels are expected to rise over the near-term. Janet Yellen, the FRB head, says she believes that inflation will rise to approximately two percent over the next few years.
Low savings rates such as Citibank CD rates prompt some investors to consider the long-term likelihood of higher returns in the stock market. Savings, money market, and certificate of deposit rates return historically low levels in the United States today.
If an inflationary environment existed, Citibank and other financial institutions would need to pay higher savings rates. For instance, in the early 1980s, double-digit returns were available to people seeking ultra low risk investments like CDs. Home mortgages were also offered at double-digit rates.
FDIC Insured
People living on a fixed income and businesses in search of secure investments for a certain percentage of working capital search for CD rates. It is possible for investors to search for CD rates within and outside of the United States.
Of course, most U.S. investors want their safe money to remain absolutely safe. U.S. certificates of deposits, such as Citibank CDs, are FDIC insured. FDIC insurance protects all deposit accounts at Citibank, including checking, savings, money market deposits, and CD accounts.
