FirstFedDirect just came out with a special 9-month CD with a yield of 4.30% APY. The minimum deposit is $10,000. This 9-month CD has an auto rate bump feature that’s tied to the 10-year Treasury rate. If the 10-year Treasury rae goes up, your yield goes up accordingly. However, if the 10-year Treasury Rate goes down, your yield remains where it is. The yield is limited to 9.99%. Potential rate increases will only occur at the end of each calendar quarter.

For those worried about inflation forcing rates up, this seems like it could reduce the risk. I haven’t reviewed the small print and the 10-year Treasury rates to see exactly how the rate bump works and the likelihood that it will be a worthwhile feature. The current yield of 4.30% APY is very competitive even without any rate bump feature.

FirstFedDirect is an internet division of First Federal Bank of California. The online bank serves customers in all states other than California. For those in California, you have to bank with First Federal Bank of California, and fortunately, they are also offering this same 9-month CD special.

The bank is another California bank that has been hit hard by the mortgage mess. It’s now down to the lowest rating of 1 star based on 3/31/08 data. However, BauerFinancial gives it a higher rating of 3 stars (adequate). This is also based on 3/31/08 data. As a result, it’s best to keep below the FDIC limits.