The national average 12-month CD rate edged lower to 1.61% in January 2026, marking a 2 basis point decline from the previous month. This move extends a year-long cooling trend, with rates now down 21 basis points compared to last year. Most notably, the spread against the 12-month Treasury has widened to a staggering -187 basis points. This disconnect highlights a sluggish transmission of market yields to traditional bank depositors.

Current Deposit Rates

Product Rate MoM YoY
12-Month CD 1.61% -2 bps -21 bps
Savings Account 0.39% +0 bps -2 bps
Money Market 0.56% -2 bps -8 bps
Interest Checking 0.07% +0 bps +0 bps
The CD term structure is currently inverted, peaking at 1.61% for the 12-month term before falling to 1.34% for five-year deposits. Liquid accounts offer even less incentive, with national savings rates averaging just 0.39% and money market accounts at 0.56%. These figures pale in comparison to the current Fed Funds rate of 3.64%. The 3-month CD at 1.35% reflects a cautious banking sector that is hesitant to compete for short-term funding. This ultra-low regime suggests banks are flush with deposits and feel little pressure to raise rates.

CD Curve vs Treasuries

Maturity CD Rate Treasury Spread (bps)
3M 1.35% 3.59% -224
6M 1.57% 3.50% -193
12M 1.61% 3.48% -187
24M 1.41% 3.47% -206
60M 1.34% 3.74% -240
Average CD-Treasury Spread
-210 bps
Strong Treasury Preference
CDs significantly underperforming Treasuries
The yield advantage of Treasuries over CDs is currently overwhelming across the entire curve. At the 12-month mark, investors are sacrificing 187 basis points by choosing a bank CD over a government bond. This gap widens to 240 basis points at the five-year maturity, where the 60-month CD offers a meager 1.34% against a 3.74% Treasury yield. For any investor with a brokerage account, Treasuries are the clear winner for yield and liquidity. Staying in traditional bank deposits currently represents a significant opportunity cost for conservative savers.

Historical Context

12M CD Rate vs History
44th percentile
Normal Range
Range: 0.13% to 1.88%
8 Similar Periods (12M CD ±25 bps of 1.61%)
Aug 2025 (1.76%)May 2025 (1.75%)Jan 2025 (1.82%)Oct 2024 (1.81%)Jul 2024 (1.85%)Apr 2024 (1.81%)Jan 2024 (1.86%)Oct 2023 (1.79%)
Forward Returns from 8 Similar Periods
Period KRE Median KRE % Pos SPX Median
3 Month +11.2% 62% +9.6%
6 Month +16.6% 88% +12.5%
12 Month +18.2% 100% +19.0%
The current 1.61% rate for 12-month CDs sits in the 45th percentile of historical data, slightly below the long-term median of 1.63%. This level is reminiscent of mid-2025 and late 2024, periods characterized by stabilizing but low deposit costs. Historically, when rates hover in this range, regional bank stocks have shown remarkable resilience and growth. Data from eight similar historical parallels shows that the KRE Regional Bank ETF has a 100% positive hit rate over the following 12 months. The median forward return for KRE in these instances is a robust 18.2%, suggesting that while savers suffer, bank equity investors may be entering a golden window.

Bank Stock Implications

Low deposit rates are driving exceptionally high Net Interest Margins for traditional lenders, particularly money center banks. While JPM and WFC have seen recent share price consolidation, their ability to keep deposit costs at 1.61% while lending at much higher market rates is a fundamental tailwind. Conversely, online banks like Ally and SoFi are facing significant pressure, with SoFi shares plunging 22.7% over the last month. These digital-first institutions often have to pay higher teaser rates to attract capital, squeezing their margins as the broader market cools. Regional banks like PNC and TFC are currently the sweet spot, benefiting from stable deposit bases and rising stock valuations.

What Savers Should Do

Savers should immediately pivot away from standard CDs and savings accounts toward U.S. Treasuries or high-yield money market funds. With a 12-month Treasury yielding 3.48% compared to a 1.61% CD, the loyalty tax for staying with a traditional bank is too high to ignore. If liquidity is a priority, look for specialized High-Yield Savings Accounts that significantly outperform the 0.39% national average. Avoid locking into long-term CDs, as the 60-month rate of 1.34% offers no protection against future inflation or rate shifts. For those with excess cash, the equity market—specifically regional banks—currently offers a more compelling risk-reward profile than fixed-income deposits.

Fed Policy Implications

The current deposit environment reveals a significant lag in Fed policy transmission to the consumer level. Despite a Fed Funds rate of 3.64%, banks have only passed on a fraction of that yield to depositors, as evidenced by the 1.61% CD rate. This allows the banking sector to absorb the spread, effectively tightening financial conditions for savers while padding bank balance sheets.

Bottom Line

The January 2026 data confirms a Goldilocks environment for bank earnings but a desert for traditional savers. With a 100% historical probability of positive 12-month returns for regional banks at these rate levels, investors should favor KRE over cash. Savers must be proactive, bypassing the 1.61% CD trap in favor of Treasuries that offer nearly double the yield. The divergence between money center weakness and regional bank strength suggests a rotation is underway within the financial sector. Position for a 18.2% median upside in regionals while moving cash out of low-yielding bank silos.