Key insights
- Long-term Treasury yields have risen sharply, with the 30-year yield hitting levels not seen since 2007, driven by inflation concerns. While attractive to cautious savers due to government backing, other options like high-yield savings accounts and CDs offer competitive or even higher returns, especially for shorter-term maturities. This rise in yields could put downward pressure on equities as investors reallocate.
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Long-term Treasury yields have surged in recent weeks as investors grow increasingly concerned that inflation may remain elevated and interest rates could stay higher for longer. The 30-year Treasury yield climbed above 5% last week and reached 5.19% today—its highest level since July 2007.
Treasuries have offered solid yields for a while, but the latest jump is making some government bonds look especially attractive again to cautious savers. Very short-term Treasury bills are paying nearly 3.7% right now, while both 20-year and 30-year Treasuries are yielding above 5%.
Treasury bonds are loans investors make to the federal government in exchange for interest payments over a set period of time. Investors have been increasingly selling bonds amid concerns that inflation could remain stubborn and borrowing costs may stay elevated. And when bond selling accelerates, Treasury yields rise.
For cautious savers, the appeal is fairly straightforward: Treasuries are backed by the U.S. government, and their yields now look more competitive than they have in years. Some investors also like that Treasury interest is exempt from state and local income taxes.
Still, higher Treasury yields don’t automatically make them the best place to park cash. In many short- to mid-term maturities, other safe savings options still offer higher returns.
Treasury yields are surging, but CDs and savings accounts still offer higher returns for many shorter timelines. The best option may depend less on chasing the top rate and more on how long you can afford to lock up your money.
Treasury yields may be getting the headlines right now, but they’re far from the only safe cash option offering attractive returns.
While Treasury bills with maturities of between one and two months currently yield 3.66%, our ranking of today’s best high-yield savings accounts includes almost two dozen options that pay 4% to 5%. Certificates of deposit (CDs) are also outpacing many Treasury maturities right now. The top nationwide CD rates for terms up to 2 years currently range from 4.05% to 4.30%—well above what comparable Treasuries are paying.
For savers looking to lock rates for longer periods, Treasuries and the top CDs are offering roughly equivalent yields at around the 3-year mark, with Treasury yields pulling ahead at 4 years and beyond. CDs also generally max out at 5 years, though a handful of banks and credit unions offer 10-year certificates. Treasuries, meanwhile, are available in terms as long as 30 years.
For savers trying to decide between Treasuries, CDs and savings accounts, one of the biggest questions may simply be how long you’re comfortable setting money aside.
High-yield savings accounts offer the most flexibility, allowing customers to move money in and out freely while still earning competitive rates. CDs and Treasuries, meanwhile, typically require locking in money for a set period of time in exchange for a guaranteed return.
That doesn’t necessarily mean the money is completely inaccessible. Treasuries can be sold before maturity, though investors could lose money if bond prices fall after purchase. CDs can also be exited early, but banks and credit unions generally charge an early withdrawal penalty.
The timing question has also become more complicated as Treasury yields continue climbing. Some analysts believe long-term Treasury yields could continue climbing in the months ahead, potentially toward 5.5% on the 30-year Treasury—or even 6%.
At the same time, future CD and savings account rates could also move higher if the Federal Reserve raises interest rates again later this year, as many investors currently expect. That leaves savers facing the same basic dilemma across both CDs and Treasuries: lock in a rate now or wait and hope rates improve further.
For many savers, though, trying to perfectly time the market may matter less than choosing the option that best matches your timeline and comfort level. Some may also prefer to spread money across multiple timelines—for example, putting part of your cash into a Treasury or CD now while waiting to see where rates move next.
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