Certificate of Deposit Rates Hit 4% APY Threshold in Late May 2026
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Fazen Markets Editorial Desk
Collective editorial team · methodology
certificate-of-depositinterest-rates
Fazen Markets Editorial Desk
Collective editorial team · methodology
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The most competitive national rates for certificates of deposit reached 4.00% annual percentage yield on Sunday, May 31, 2026, breaching a key psychological threshold for savers and institutions. Finance.yahoo.com reported the availability of these yields from select online and regional banks. The move extends a multi-week climb in deposit pricing, pushing top yields 45 basis points higher than their levels at the start of May.
The last comparable period of 4% APY on federally insured deposits occurred in February 2009, when the 2-year Treasury yield averaged 1.00%. The current macro backdrop features a 10-year Treasury yield at 4.40% and a federal funds rate target range of 5.00%-5.25%. Deposit rates have lagged the Fed's hiking cycle, but that gap is now closing rapidly.
A liquidity squeeze triggered the recent acceleration in CD pricing. Regional banks reported a $120 billion aggregate outflow from non-interest-bearing accounts in Q1 2026, forcing institutions to compete more aggressively for stable funding. Concurrently, money market fund assets swelled to a record $6.4 trillion, exerting upward pressure on all short-term rates. The catalyst was a shift in bank treasury management strategy from asset accumulation to core liability retention.
Concrete data shows a sharp repricing in the deposit market. The national average for a 12-month CD stood at 2.85% on May 31, 2026. The top-quartile rate, however, reached 4.00% APY. This represents a 1.15 percentage point premium to the average. One year prior, the top CD rate was 3.10%, meaning the best-available yield has increased by 90 basis points.
A peer comparison highlights the shift. The 3-month Treasury bill yielded 4.15% on the same date. The 4.00% CD rate thus offers a competitive, insured alternative with a marginally longer duration. Versus the S&P 500's year-to-date return of 4.2%, the risk-free CD yield presents a meaningful allocation decision for conservative capital. The data suggests the deposit beta—the percentage of Fed hikes passed to savers—has jumped from 35% in 2025 to over 60% by late May 2026.
The rising CD rates create distinct second-order effects. Net interest margins for large banks like JPMorgan Chase (JPM) and Bank of America (BAC) face incremental pressure, potentially compressing earnings by 1-3% if the trend persists. Conversely, online-focused banks like Ally Financial (ALLY) and Discover Financial Services (DFS), which rely on rate-sensitive deposits, may see a stabilization in deposit outflows, improving their funding cost predictability.
A key counter-argument is that the 4% rate is not broadly available and may reflect promotional pricing rather than a systemic shift. The risk is that these elevated offers fail to attract sufficient volume to alter aggregate banking sector liquidity. Positioning data shows institutional money market funds have seen consistent inflows, but a portion of that flow is now rotating into longer-duration CDs and agency debt to lock in yields ahead of potential Fed easing.
Two specific catalysts will determine the sustainability of 4% CD rates. The Federal Open Market Committee meeting on June 17, 2026, will provide updated dot plots and guidance on the terminal rate. The May Consumer Price Index report, due June 12, 2026, will signal whether inflationary pressures justify maintaining elevated policy rates. A core CPI print above 0.3% month-over-month would support continued high deposit yields.
Levels to watch include the 2-year Treasury yield, a key benchmark for CD pricing. A sustained break above 4.50% would likely pull more CD rates toward 4.25% APY. Conversely, a drop below 4.10% could trigger a swift retracement in promotional offers. Monitoring weekly bank H.8 data for changes in small time deposits will show if the high-rate strategy is successfully gathering funds.
A 4.00% APY CD rate exerts immediate upward pressure on high-yield savings account (HYSA) yields. Banks use CDs to set a ceiling for their savings products. Expect leading HYSA rates, currently near 3.75%, to increase by 10-25 basis points over the next statement cycle as institutions compete to retain depositors. The spread between a locked CD and a liquid HYSA will likely narrow.
The current CD rate structure is historically unusual. In 2007, when the Fed funds rate peaked at 5.25%, top 12-month CD rates reached 5.35% APY. Today's 4.00% CD rate exists alongside a higher policy rate of 5.00%-5.25%, indicating a lower deposit beta. This reflects a banking system with abundant excess reserves, reducing the urgent need for retail deposits compared to the pre-2008 era.
A 4% CD and a Treasury of similar maturity offer comparable risk-free returns, but with different tax treatments. CD interest is subject to state and local income taxes, whereas Treasury interest is exempt from state and local taxes. For an investor in a high-tax state, a Treasury yielding 3.90% may provide a higher after-tax return than a 4.00% CD. The choice hinges on individual tax circumstances and liquidity needs, as Treasuries are more easily sold on the secondary market.
The breach of 4% APY signals a bank funding competition that will pressure net interest margins while offering savers the highest insured returns in 17 years.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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