CDs vs Bonds vs Treasuries 2026: Fixed-Income Comparison

The Bottom Line

Three places to park cash, three different optimization targets. Treasuries are the sweet spot for most savers — roughly 4.30% yield with zero credit risk and state-tax exemption. CDs offer slightly lower yields (3.90-4.10% on top 9-12 month CDs) but FDIC insurance and operational simplicity. Investment-grade corporate bonds pay 5-6% but with credit risk and price volatility. For cash you'll need in 12 months: Treasuries first, CDs second, corporate bonds only for income-focused investors who accept the risk.

Key Facts — Fixed-income comparison

1.Top 12-month CD yields (May 2026): Marcus 9-month 4.00%, Marcus 12-month 3.90%, CIT Platinum 4.10% on $5K+.
2.12-month Treasury bill yield (May 2026): approximately 4.30%, state-tax exempt.
3.Investment-grade corporate bonds (1-year maturity): 5.0-5.8% depending on issuer credit quality.
4.All CDs FDIC-insured to $250K per depositor. Treasuries backed by U.S. government (no FDIC limit).
5.Corporate bonds have credit risk; investment-grade default rate ~0.1-2% annually depending on rating.

Side-by-Side Comparison

Feature	CDs (12-month)	Treasuries (12-month T-bill)	Investment-Grade Corporate Bonds
Yield	3.90-4.10%	~4.30%	5.0-5.8% (varies by issuer)
Insurance / backing	FDIC $250K	U.S. government (no limit)	Issuer's credit quality
Credit risk	None (within FDIC)	None	Real, varies by rating
State tax	Taxable	Exempt	Taxable
Federal tax	Taxable	Taxable	Taxable
Liquidity before maturity	Penalty (3-6 months interest)	Sell at market price	Sell at market price + spread
Purchase minimums	$0-$500 typically	$100 face value	Often $1,000-$10,000
Where to buy	Banks or brokerages	TreasuryDirect.gov or brokerages	Brokerages
Inflation protection	None	None (TIPS/I-bonds separate)	None

Rates verified May 13, 2026.

Why Treasuries are usually the right answer

For most savers parking $25K-$250K for 6-18 months, Treasuries are optimal. Three structural advantages:

1. State-tax exemption. Treasury interest is exempt from state and local income taxes. For high-tax-state residents:

State	State tax	After-tax advantage on 4.30% Treasury vs CD
California (13.3%)	High	+0.57 percentage points
New York (10.9%)	High	+0.47 percentage points
New Jersey (10.75%)	High	+0.46 percentage points
Massachusetts (5.0%)	Medium	+0.22 percentage points
Texas/Florida/Washington (0%)	None	$0 — no advantage

On a $50,000 Treasury held one year by a California resident:

Treasury: $2,150 interest, state-tax exempt = $2,150 kept
Equivalent 4.30% CD: $2,150 − $286 state tax = $1,864 kept
State-tax advantage: $286/year on $50K

2. No FDIC cap. FDIC caps at $250K per depositor per institution. Treasuries have no cap. A $500K Treasury position has the same backing as a $5,000 one.

3. Better mid-term liquidity than CDs. CDs charge 3-6 months of interest as an early-withdrawal penalty. T-bills can be sold on the secondary market at current prices — usually close to face value when held near maturity, with limited price risk on short-duration instruments.

When CDs win

CDs make sense in specific scenarios:

1. You already bank at a top HYSA provider. Opening a Marcus CD is one click. No new TreasuryDirect account, no brokerage research. Operationally simpler.

2. You don't have a brokerage account. Buying Treasuries efficiently requires a brokerage (Fidelity, Schwab, Vanguard) or TreasuryDirect. Friction of opening one may outweigh yield difference.

3. You're in a no-state-income-tax state. Texas, Florida, Washington, Tennessee, etc. — state-tax exemption doesn't apply, so CDs and Treasuries are roughly equivalent on after-tax yield.

4. Promotional CD rates. Banks occasionally run promotional CDs above market (5%+ on short-term deals). These can beat Treasury yields if captured.

For most savers: Treasuries for the bulk, CDs for promotional windows and operational simplicity.

When corporate bonds win

Investment-grade corporate bonds (BBB- or higher) pay 5-6% on 1-year maturities — meaningfully higher than Treasuries.

Default rates by rating (historical):

Rating	Annual default rate	Yield drag from defaults
AAA	0.0-0.1%	Negligible
AA	0.1-0.2%	0.05-0.10%
A	0.1-0.3%	0.05-0.15%
BBB	0.3-0.5%	0.15-0.30%
BB (junk)	1.0-2.0%	0.50-1.50%

For AAA/AA-rated 1-year corporates at 5.2%, credit-loss-adjusted yield is ~5.1% — still meaningfully above Treasuries at 4.30%. For BB-rated junk at 7%, credit-loss-adjusted yield can drop to 5.5-6%.

Bond mutual funds and ETFs like Vanguard Total Bond (BND), iShares Aggregate Bond (AGG), or SPSB (short-term corporates) give diversified exposure without individual credit-picking.

Corporate bonds make sense when:

You're income-focused (retirees, conservative allocation)
You can diversify ($100K+ across multiple issuers)
You're comfortable with interest-rate volatility
You have brokerage access with bond research tools

Don't use corporate bonds when:

You might need the money for an emergency
You can't tolerate price volatility
Your balance is small ($5K in a single corporate bond = concentrated credit risk)

Worked example: $100,000 for 12 months

A California resident (33% federal, 13.3% state) parking $100K for 12 months:

Option	Nominal yield	Annual interest	After fed (-33%)	After CA state	After-tax yield
Marcus 12-month CD	3.90%	$3,900	$2,613	$2,265	2.27%
12-month Treasury	4.30%	$4,300	$2,881	$2,881 (exempt)	2.88%
AAA corporate bond	5.20%	$5,200	$3,484	$3,021	3.02%

After-tax ranking for this CA resident:

AAA corporate bond: 3.02% (highest, credit risk)
Treasury: 2.88% (state-tax advantage drives it close)
Marcus CD: 2.27% (lowest, simplest)

Corporate bond premium over Treasury: $140/year on $100K. Treasury vs CD: $616/year on $100K — state-tax advantage is substantial for high-tax-state residents.

For TX/FL residents, the Treasury advantage disappears.

What about HYSAs as a fourth option?

For pure liquid cash (emergency fund), a HYSA at 3.20-4.00% is usually better than a 12-month CD/Treasury because of liquidity. Decision tree:

Time horizon	Optimal product
Immediate access (emergency fund)	HYSA (Marcus 3.65%, SoFi 4.00% with DD)
1-3 months	HYSA or short-term Treasury (4-13 week T-bill)
6-12 months	Treasury (T-bill) or CD
1-3 years	CD ladder or Treasury notes (2-year)
3-5 years	CD ladder, Treasury notes, or corporate bond ladder
5+ years	Diversified stock/bond portfolio (not pure fixed income)

Most common mistake: parking cash in a CD when a HYSA would serve at similar yields with full liquidity. If you might need the money before the CD matures, the early-withdrawal penalty often wipes out the yield advantage.

Build a fixed-income ladder if...

Most fixed-income optimizers build ladders. Example $100K ladder:

$25K: 3-month T-bill (~4.30%, refinances quarterly)
$25K: 6-month T-bill (~4.40%)
$25K: 12-month T-bill (~4.30%)
$25K: 18-month CD or T-note (~3.70-4.00%)

As each rung matures, reinvest into a new 18-month rung. Average duration: ~9 months. Average yield: ~4.20%. Liquidity: $25K becomes available every 3 months. T-bill portions are state-tax exempt.

Choose CDs if...

You already bank at Marcus, Ally, or another HYSA provider
You live in a no-state-tax state (TX, FL, WA, TN)
You want FDIC insurance and don't have brokerage access
You're parking $5K-$50K and want simplicity
You can capture a promotional CD rate above market

Choose Treasuries if...

You live in a high-tax state (CA, NY, NJ, IL, MA)
Your balance exceeds $250K (no FDIC cap)
You have a brokerage account at Fidelity, Vanguard, or Schwab
You might need to sell before maturity (better liquidity than CDs)
You want absolute lowest-risk yield

Choose Corporate Bonds if...

You're income-focused (retirees, conservative allocation)
You can diversify ($100K+ in bonds across multiple issuers)
You're comfortable with interest-rate volatility
You want yield premium over Treasuries (~0.7-1.5%)
You have research time or use bond funds (BND, AGG, SPSB)

Watch Out:

Buying Treasuries through TreasuryDirect.gov has zero fees but the interface is dated. Buying through Fidelity, Vanguard, or Schwab is easier — competitive bid/ask, real-time pricing, integration with existing accounts. Brokerages may build a small markup into individual bond yields. For amounts above $10K, buying through a brokerage is usually the better path.

What to Do Now

Calculate your state-tax savings on Treasuries: state marginal tax rate × Treasury yield. High-tax-state residents typically save 0.4-0.6 points on a 4.30% Treasury.

For cash you might need any day: keep in HYSA. Don't lock up emergency funds in CDs or Treasuries.

For 6-18 month cash: default to 12-month T-bills if you have a brokerage. Otherwise use a top-rate CD.

For larger balances ($250K+) or longer horizons, build a Treasury or CD ladder with staggered maturities.

Consider corporate bonds only with brokerage access, research time, and at least $100K to diversify — or use bond ETFs like BND/SPSB.

Key Takeaways

✦Treasuries ~4.30% (state-tax exempt). Top CDs 3.90-4.10%. AAA corporate bonds 5.0-5.8% with credit risk.
✦Treasuries win for high-tax-state residents — state-tax exemption worth 0.3-0.6 points after tax.
✦CDs win for operational simplicity and savers who already use a top HYSA provider.
✦Corporate bonds win for higher yield with credit risk — best for income investors with $100K+ to diversify.
✦FDIC caps at $250K per institution; Treasuries have no cap.
✦Match product to time horizon: HYSA for immediate access, T-bills for 6-12 months, longer durations for known multi-year cash.

Related Calculators and Guides

Sources: Marcus.com, TreasuryDirect.gov, U.S. Department of the Treasury daily yield curve (May 2026), CIT Bank, Wealthvieu CD rate analysis (April-May 2026), Bankrate fixed-income roundup (May 2026). Yields verified May 13, 2026. Treasury yields change daily; CD rates change weekly to monthly. SwitchWize may receive commission when readers open accounts through our links; this does not affect rankings.

Frequently asked questions

Which pays more in 2026 — CDs, Treasuries, or corporate bonds?+

Corporate bonds pay the highest yields (5-6%+ on investment-grade) but with credit risk. Treasuries pay roughly 4.30% on 12-month maturities with zero credit risk and state-tax exemption. Top CDs pay 3.90-4.10% (Marcus 9-month at 4.00%, CIT Platinum at 4.10% on $5K+). Ranking by yield: bonds > Treasuries > CDs. Ranking by safety: Treasuries = CDs (FDIC) > bonds. Most savers should default to Treasuries or CDs for cash they need in 12 months.

Are Treasuries actually state-tax-exempt?+

Yes. Interest from U.S. Treasury securities is exempt from state and local income taxes. For high-tax-state residents (CA 13.3%, NY 10.9%, NJ 10.75%), this can effectively boost after-tax yield by 0.3-0.6 percentage points compared to CDs or HYSAs at the same nominal rate. On $50,000 in a 4.30% Treasury vs a 4.30% CD held by a California resident, the Treasury saves roughly $285/year in state tax.

Are CDs really safer than corporate bonds?+

Yes. CDs are FDIC-insured up to $250,000 per depositor per institution. Corporate bonds have credit risk — the issuer could default. Investment-grade corporates have historical default rates of 0.1-0.3% annually for AAA/AA, rising to 0.5-2% for BBB. High-yield ('junk') corporate bonds default at 4-6% annually. For capital preservation, CDs and Treasuries are clearly safer.

What's the difference between a T-bill, T-note, and T-bond?+

Maturity. T-bills are short-term (4 weeks to 52 weeks). T-notes are medium-term (2 to 10 years). T-bonds are long-term (20 to 30 years). For parking cash you'll need in 6-18 months, T-bills are the relevant security. T-bills are sold at a discount to face value. As of May 2026, a 12-month T-bill yields approximately 4.30%.

What's a CD ladder and should I use one?+

A CD ladder is a strategy of buying multiple CDs with staggered maturities (e.g., 3-month, 6-month, 9-month, 12-month) so a portion of your money becomes available periodically. As each CD matures, you can reinvest at current rates or use the cash. CD ladders work well when you want some yield optimization without locking up all your cash for one duration. For cash you'll definitely need in 12 months, a single CD or T-bill is simpler.

What about Treasury Bills via the TreasuryDirect website?+

TreasuryDirect.gov is the U.S. Treasury's direct portal for buying T-bills, T-notes, T-bonds, and I-bonds with no fees. The interface is dated and the process is more manual than buying through a brokerage. For most retail investors, buying Treasuries through Fidelity, Vanguard, or Schwab is easier — competitive bid/ask, real-time pricing, integration with existing accounts. TreasuryDirect is most useful for I-bonds, which aren't available through brokerages.

Should I use corporate bonds for emergency funds?+

No. Emergency funds need to be liquid, capital-preserving, and accessible. Corporate bonds fail at least one of these — bond prices fluctuate with interest rates, and during market stress, even investment-grade corporates can decline 5-10%+. Use HYSA, CDs, or Treasuries for emergency funds. Corporate bonds are for income generation, not emergency reserve.

What about TIPS and I-bonds?+

Both are Treasury products with inflation protection. TIPS adjust principal based on CPI inflation. I-bonds combine a fixed rate (currently ~1.20% for May-Oct 2026 issues) with an inflation rate that adjusts every 6 months. I-bonds have $10,000/year purchase limit per individual through TreasuryDirect. Both protect purchasing power but typically yield less than nominal Treasuries when inflation is low. As of May 2026, I-bonds yield approximately 3.11%.

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