The Bank CD Beat the Treasury for About a Month. Now the Treasury Wins Before Your State Even Takes Its Cut.

Update, October 5, 2026: This post ran in August, when the best three-year CD (4.50%) beat the three-year Treasury (4.25%). That flipped back. The Fed raised rates on September 16, and the three-year Treasury hit 4.91% on October 1 while the best three-year CD we can find pays 4.80%. The numbers, the verdict and the FAQs below are updated. Our original advice to decide before the September Fed meeting is now moot.

If you’ve got cash you won’t touch for three years, the Treasury is the better buy again. It pays more than the best bank CD before taxes, and then your state can’t touch the interest.

In August we told you the boring bank product had taken the lead. It held it for about a month.

What changed

The Fed’s H.15 release put the three-year Treasury yield at 4.91% on October 1. On August 25 it was 4.25%. Over the last week of September it traded between 4.91% and 5.01%.

The trigger was the Fed itself. It raised its target range a quarter point on September 16, to 3.75% to 4%, and longer Treasury yields ran well past that quarter point.

Banks moved slower. The top three-year CD on Fortune’s October 5 list, built from Curinos data, is Popular Direct at 4.80% APY with a $10,000 minimum. The next best is 4.47%.

Translation: the bank’s best three-year offer now trails the government’s by about a tenth of a point.

The state tax widens the gap

Treasury interest is exempt from state and local income tax. TreasuryDirect says it plainly: “No state or local taxes.” CD interest gets taxed by your state like a paycheck.

In August that tax break decided a close race. Now it just piles on. In a state with no income tax, the Treasury still wins, 4.91% to 4.80%. At a 5% state rate the CD nets about 4.56%. At 8% it nets about 4.42%.

On $25,000 in a 5% state, that’s roughly $87 a year in the Treasury’s favor, or about $260 over three years. Not life-changing. But it’s free money for picking the right box.

The number that should bother you more

The FDIC’s national average for a 36-month CD is 1.36%. Plain savings averages 0.37%.

Put $25,000 in a three-year CD at 1.36% and you earn about $1,030. At 4.91% in Treasury notes you collect about $3,680 in interest over the same three years.

The bank’s bet is that you’ll roll your maturing CD into whatever it puts in front of you and never price the alternative.

Do this

Look up the rate on your current CD or savings account this week. If it starts with a 1 or a 0, you’re the average, and the average is losing to a Treasury note by more than three points.

Then buy the note. Treasury auctions a new three-year note on Tuesday, October 6. The September auction yielded 4.474%, and the auction sets your rate, so don’t assume you’ll get 4.91%. Miss it and the next one comes next month, or buy an existing note through your brokerage on any trading day. The minimum is $100.

If your money is for six to twelve months rather than three years, read our take on Treasury bills versus savings accounts instead. Run your balance through our savings calculator, and see where the top rates sit on our best savings accounts page.

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