ING Direct just pushed its 1 year CD rates to 3.6% (from 3.45%). I've been thinking about pulling the trigger on some 1 year CDs or short term bonds to grab some extra yield, but I'm going to wait. Here's why.

The Fed is still tighening. They will meet on May 3 and again on June 30 (they meed 8 times per year). The tightening will lead to short term rates of 3.25% by June 30th (if you believe the futures market). Lately INGDirect has been pretty aggressive raising their savings account rate in response to Fed moves. INGDirect has lately offered savings rates of Fed Funds rate+ .1% or .25%. If they stay true to form INGDirect should have a savings rate north of 3.6% by the end of June. As the Fed keeps tightenting the savings rate should get even better than the current CD rate.

INGDirect has excellent customer service and very good savings account rates. This has allowed them to slip by with merely decent CD rates (a lot of customers probably do not want the hassle of opening multiple accounts to squeeze a fraction of a percent on a few thousand dollars.)

As Fed tightening winds down in a year or so CDs may make more sense - right now I'm keeping my powder dry and waiting for higher rates.

If you don't have an INGDirect account it is one of the great no brainer deals out there. It is easy to use, FDIC insured, easy to link into your existing bank account, and it pays a very nice interest rate (3% currently).

-fgmortgage calculator