CDs Now Pay More Than Treasuries, the First Time Savers Have Seen This in Years For the first time in years, federally insured bank deposits are outperforming government bonds in terms of yield, marking a significant shift for savers. A 3-year Treasury note currently yields 4.25%, while a top nationally available 3-year certificate of deposit (CD) offers 4.50%. This gap highlights a growing debate over whether traditional safe-haven investments like Treasuries still remain the best option for income-focused investors. The Federal Reserve has maintained its target rate at 3.75% since early 2026, keeping short-term Treasury bill yields closely aligned with this rate. The 4-week T-bill yield stands at 3.70%, the 13-week at 3.81%, and the 52-week at 4.02%. Even the 3-year note only reaches 4.25%, while online banks are offering 4.50% on 3-year CDs. This discrepancy reflects the competitive advantage of digital banks, which often provide higher rates than traditional brick-and-mortar institutions. The FDIC national average for a 12-month CD remains low at 1.71%, underscoring the disparity between top-tier offers and average rates. Despite the CD’s higher yield, there are notable drawbacks. A 4.50% CD locks in the rate for the full term, which could leave investors vulnerable if rates rise. Policymakers are currently discussing potential rate hikes rather than cuts, meaning CD holders might miss out on higher returns. Additionally, CDs carry early-withdrawal penalties and report interest as ordinary income, whereas Treasuries remain state-tax exempt. Neither instrument adjusts to short-term rate changes after purchase, limiting their flexibility in a shifting economic environment. For investors seeking more dynamic options, the Janus Henderson AAA CLO ETF (NYSEARCA:JAAA) stands out.#federal_reserve #fdic #janus_henderson #clos #eldridge
