1-Year Certificate of Deposit offerings remain quite strong. As of the date of this article, there are at least 8 online 1-year CDs being offered at 5.15% or higher. Depending on where you live, you will probably also find 1-year CDs from local banks and credit unions at or above this level. Banks are competing for your money, especially if you are willing to forgo liquidity for one year.
At the same time, US Producer Price Index (PPI) and US Consumer Price Index (CPI) data released last Thursday and Friday indicated that inflation may be below 5%. As a result, market participants have begun to price in an increased likelihood that the Fed will cut the Fed funds rate below its current 5.00 to 5.25% target before the end of 2023. US Treasuries with maturities in May 2024 are now trading at yields between 4.70% and 4.75%.
Even for those in the highest tax brackets in New York City or California where state and local taxes can total 10%, one-year US Treasuries are going to net less after tax than 1-year CDs. Plus, 1-year CDs allow the opportunity to diversify holdings in case of a catastrophic US government default (although it is possible that banks could be equally or more impacted in a default so you should always stay below FDIC limits).
For those willing to go out 18 months or more, the advantage of CDs can be even more attractive. BestCashCow shows at least a handful of 18-month CD offerings at or above 5.00% and US Treasuries maturing around November 15, 2024 are now yielding below 4.35%.
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