Monday, May 22, 2006

PIMCO's Bill Gross and the rise of savings accounts

Global inflation has remained low, but the combination of U.S. consumption propelled by a multi-year housing boom, Chinese reciprocation in the form of massive investment spending, and the positive knock on effects in Japan and numerous "emerging" economies produced surging global growth that has caused central banks and indeed private investors to enforce higher real yields as recompense. Bill Gross: PIMCO Investment Outlook June/July 2006

Competition for deposits has caused a huge run up in thinterestst rates being offered by online banks. High yield saving account rates now range from 4.5% to an astounding 4.75%. According to Comscore 27-percent increase over the previous year in online banking usage. Even worse from the bank perspective is the fact that online-only high-yield savings accounts have had disruptive impact on customer asset loyalty. In other words banks now have to deal with yield sensitive customers who will shop for the highest rate. Make sure to do your part to help enforce higher real yields.


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