Investors disenchanted with low yields from CDs

October 01, 1991|By Timothy J. Mullaney

C As investors prepare for a month when more certificate-of-deposit money is scheduled to roll over than ever before, a study commissioned by Fidelity Investments says that only 31 percent of CD holders with October expirations are committed to keeping their money in the bank.

The culprit is lower interest rates, says Fidelity, relying on a national polling firm's survey of 302 consumers who own CDs scheduled to expireduring the next six months. CD yields have fallen to between 5 percent and 6 percent, giving pause to many customers who invested in CDs when rates were much higher.

"They're just dissatisfied with yields," said Mary Ruth Moran, a Boston-based marketing manager for Fidelity. "In terms of alternate investments they'll consider, that's by far the most important consideration."

Mutual fund companies such as Fidelity, as well as stock brokerage firms, have been waiting for October, smelling revenge. They are trying to reclaim market share they lost in October 1987, when the stock market's crash drove billions of dollars out of stocks and into CDs because bank deposits are federally insured up to $100,000.

But now interest rates are so low that investors told Fidelity's pollster that they are more worried about yield than about the safety of their principal. According to the poll, 69 percent of investors said that yield was the most important factor.

"Yield has become more important as [CD] yields have come down," said Steven L. Messina, a Fidelity vice president who manages the firm's Baltimore office. "If you're investing in Treasury money funds, they're holding all short-term Treasury notes. You might not need [federal deposit] insurance if you're investing in short-term Treasury notes."

Ms. Moran said that 52 percent of consumers surveyed said they would look for alternatives to CDs.

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