I Bonds vs T-Bills vs CDs in 2026: Where to Park Cash

The Federal Reserve held its target range at 3.50%–3.75% at the June 17, 2026 FOMC meeting, with the median dot plot now signaling at least one rate hike before year-end.^[1] That stalled the steady glide-path lower that depositors enjoyed through 2024 and 2025, and it has put cash yields back near 4% across nearly every safe vehicle. Which is good news. The harder question — and the one this guide is built around — is which safe vehicle for which dollar.

If you already have an emergency fund parked in a high-yield savings account paying around 4% APY, you are not asking the wrong question. You are asking the next question. Our emergency-fund piece covered the always-liquid layer; this one covers the layer just behind it: cash you can lock for somewhere between 90 days and five years. That is the territory where Series I Savings Bonds, Treasury bills, and certificates of deposit are the three serious tools — and where the wrong choice can leave thousands of dollars of yield, tax savings, or optionality on the table.

Why these three (and not HYSA or stocks)

The right vehicle is a function of two questions: how long can the money be locked, and what risk are you willing to take with the principal. Both questions collapse to a time horizon, because risk tolerance for principal-protected dollars is roughly the same across most readers — you do not want to lose any.

For dollars you might need this week, a high-yield savings account or a money-market fund is the only sensible answer. The instant-liquidity premium is real and it is worth taking a few basis points of yield to keep it. For dollars you do not need for 10+ years, equities — specifically broad-market index funds — historically deliver about 10% nominal returns and crush every cash vehicle on the same long-run window.^[2]

The middle window — 3 months to 5 years — is where the cash-vehicle decision matters. House down payments. Tax bills. A planned car replacement. The deductible bucket inside an emergency fund. The cash piece of a glide-path-to-retirement portfolio. The early-retiree's two-year living-expense ladder. In each case the dollars need to be principal-protected and yield-competitive, and the buyer can name a date when the cash is needed. That is the question this guide answers.

The 2026 yield landscape (June reading)

Here is what each vehicle is paying as of mid-June 2026, verified against the Treasury, the FDIC, and major brokerage CD listings on the day this was written.

Rates as of June 19, 2026. Verify with the institution or TreasuryDirect before purchase — these move daily.

Three things to notice. First, the headline yields are all clustered in a tight 4.00%–4.30% band — there is no obvious winner on yield alone. Second, the state-tax column quietly does a lot of work: a 4.28% T-bill in a 9.3% California bracket is the cash-equivalent of a 4.71% taxable CD.^[7] Third, the I Bond is the only vehicle with an explicit inflation-adjustment mechanism baked in — every six months the inflation portion of the composite rate resets to the latest CPI-U reading.

How I Bonds actually work

Series I Savings Bonds — usually shortened to "I Bonds" — are non-marketable U.S. Treasury obligations sold exclusively at TreasuryDirect.gov in electronic form (a small paper-bond carveout exists for tax-refund purchases via Form 8888).^[8] They earn a composite interest rate that combines two pieces:

• Fixed rate — set at purchase and locked for the 30-year life of the bond. The May 2026 fixed rate is 0.90%.^[6]
• Inflation rate — reset every May 1 and November 1 based on the prior six months of CPI-U. The May 2026 semiannual inflation rate is 1.67% (an annualized 3.34%).
• Composite rate — what your bond actually earns for the next six months: 4.26% for any bond purchased between May 1, 2026 and October 31, 2026.

The fixed-rate portion is the part that matters strategically. It travels with the bond for 30 years. A 0.90% fixed rate is meaningfully better than the 0.00% fixed rate carried by bonds purchased between November 2020 and April 2022 — and meaningfully worse than the 1.30% fixed rate of the November 2023 issue. If you are buying I Bonds as a long-term tax-deferred inflation hedge rather than a short-term cash park, the fixed rate is the entire game.

The locks, the penalties, and the 30-year life

An I Bond purchased today is illiquid for 12 months — TreasuryDirect literally will not let you redeem it. Between months 12 and 60, you may redeem but you forfeit the most recent three months of interest. After month 60, no penalty. The bond continues to earn interest for 30 years and stops accruing at month 360.^[8]

The 12-month lock is the most-misunderstood feature for first-time buyers. It is absolute. Treat any I Bond purchase as money you can guarantee you will not need for 12 months, and budget around the worst case where you held an extra month of cash you didn't need to. After 12 months the lock loosens; after 5 years it disappears.

The purchase caps

Each calendar year, an individual taxpayer can buy:

• Up to $10,000 in electronic I Bonds through their personal TreasuryDirect account.
• Up to $5,000 in paper I Bonds using a federal tax refund, requested on IRS Form 8888.
• Separately, a trust or a business entity gets its own $10,000 limit. Some advanced users open separate-entity TreasuryDirect accounts to expand capacity.^[9]

A married couple filing jointly can therefore put up to $25,000 per year into I Bonds without exotic structures ($10K each + $5K shared refund). It takes patience to build a meaningful I Bond ladder.

The tax wrinkle

I Bond interest is federally taxable but exempt from state and local income tax under 31 U.S.C. §3124(a) — the same protection that covers all Treasury obligations.^[7] The federal tax is normally deferred until the bond is redeemed, which is unusual. Practically, that means a 30-year I Bond can accumulate interest income for three decades while owing zero federal tax until the redemption year. There is also a separate Education Tax Exclusion under IRC §135 that can make the interest fully tax-free if proceeds are used for qualified higher-education expenses in the redemption year and your income is under the published threshold.^[8]

How Treasury bills actually work

Treasury bills are short-term Treasury debt — original maturities of 4 weeks, 8 weeks, 13 weeks (3 months), 17 weeks, 26 weeks (6 months), and 52 weeks (1 year). The Treasury auctions new bills every week and most issues are oversubscribed by a factor of two or three.^[10]

The mechanic is different from CDs and I Bonds. T-bills do not pay coupon interest. They are sold at a discount to face value and pay face value at maturity. The yield is the difference. A 4-week bill quoted at a 4.20% discount basis with $10,000 face value sells today for roughly $9,967.69 and pays out $10,000 in 28 days. The $32.31 spread is your return.

The wrinkle: a 4.20% discount basis quote is not the same as a 4.20% investment yield. The Treasury also publishes an "investment yield" (or "bond-equivalent yield") number that uses a 365-day year and a different denominator. It will always be higher than the discount-basis quote. For the same 4-week bill above, the investment yield works out to about 4.27%. Use the investment yield when comparing T-bills to CDs and HYSAs.^[10]

How to buy them: TreasuryDirect vs brokerage

Two paths. The first is TreasuryDirect.gov, a Treasury website that lets you bid (typically non-competitively, which means you accept the auction-clearing yield) and hold T-bills with no brokerage middleman. Minimum is $100, no commissions, no markups. The site is famously creaky but it works.

The second is a brokerage — Fidelity, Schwab, Vanguard, and most others sell T-bills both at new-issue auctions (no commission) and on the secondary market (small spread). Brokerage holdings are simpler to manage alongside other investments and let you sell mid-life without setting up TreasuryDirect's bank link, but you give up the cleanest direct-from-Treasury path.

The secondary market — and reinvestment risk

T-bills trade actively in the secondary market. If you bought a 26-week bill three months ago and need the money today, you can sell into the market at the prevailing price. That price moves with current short-term rates — if rates have risen since you bought, you will sell at a small loss; if they have fallen, a small gain. Held to maturity, you receive face value with certainty.

The bigger risk is reinvestment risk. A 13-week bill bought today at 4.28% rolls off in October 2026. If the Fed has cut and 13-week bills are then yielding 3.50%, you have no choice but to reinvest at the lower rate. CDs handle this differently — the rate locks for the full term — and that is the core trade-off between the two for any horizon longer than a few months.

How CDs actually work

A certificate of deposit is a time deposit at a bank or credit union. You commit a known principal for a known term and the bank pays a known APY. At maturity you receive principal plus accrued interest. Withdraw early and you pay a penalty — typically 3 months of interest for terms under 12 months, 6 months for 1–4 year terms, and 12 months for 5+ year terms.^[11]

Bank CDs are FDIC-insured up to $250,000 per depositor, per bank, per ownership category. Credit-union CDs (technically called "share certificates") are NCUA-insured to the same limit.^[12] The insurance is the load-bearing feature — it is what makes the CD a true cash-vehicle equivalent to T-bills rather than corporate credit risk.

Bank CDs vs brokered CDs

The two flavors look similar on the surface but behave differently in important ways.

The two structural risks unique to brokered CDs are worth naming. A callable CD at 4.80% looks better than a 4.20% non-callable on the day you buy it, but if rates fall to 3.50% the bank will call the CD and return your money — leaving you with reinvestment risk you didn't sign up for. Always read the call provisions before buying. And secondary-market sales introduce mark-to-market risk if you exit early — there is no "break the CD for 6 months of interest" option. Whether that is good news or bad news depends on which direction rates have moved.

The ladder: the standard CD strategy

The classic CD strategy is the ladder. Instead of buying one $50,000 5-year CD, you buy five $10,000 CDs at 1, 2, 3, 4, and 5-year terms. Each year one CD matures and you reinvest the proceeds at the back of the ladder (new 5-year). After five years you hold five rolling 5-year CDs but one always matures within 12 months — combining the higher yield of the long end with the liquidity of an annual maturity.

Ladders make most sense when the yield curve has a meaningful upward slope. In June 2026 the slope from 1-year to 5-year CDs is essentially flat, which reduces the ladder's advantage versus a single short CD plus reinvestment. The defensive argument for the ladder — protection from any one-year rate shock — still holds.

The tax treatment that changes everything

The single most-overlooked variable in the I-bond / T-bill / CD comparison is state income tax. The federal government cannot tax interest on state and municipal obligations under the doctrine of intergovernmental tax immunity; states cannot tax interest on federal obligations under the same doctrine, codified at 31 U.S.C. §3124(a).^[7]

Practically, that means:

• I Bond interest — federal taxable, state-tax exempt everywhere.
• T-bill interest — federal taxable, state-tax exempt everywhere.
• CD interest — federal taxable AND state taxable.
• HYSA interest — federal taxable AND state taxable (same as CDs).

The size of the gap depends on your state's top marginal rate. Here is what a headline 4.20% T-bill yield is "really" worth — i.e., the equivalent taxable CD APY a resident would need to match the after-tax return — in five high-tax states.

Equivalent yield = T-bill yield ÷ (1 − state rate). Assumes the saver is in the top marginal bracket and itemizes no SALT-related offsets.

If you live in a state with a 9%+ top bracket, the headline-yield-only comparison underestimates the T-bill / I-bond advantage by 50–65 basis points. That is enough to flip the answer in many practical cases — a 4.10% bank CD is often dominated by a 4.05% T-bill once state tax is in the picture.

Three case studies with the math

Case 1: The 18-month house down payment

Priya and Theo, both 33, are stacking cash for a Bay Area home down payment. They expect to close around December 2027, roughly 18 months away. They have $80,000 saved and add $4,000 a month from W-2 income. State: California (13.3% top bracket).

The wrong default: leave it all in their 4.10% HYSA. Over 18 months they earn roughly $4,150 in interest before tax, of which California takes another $552 in state tax, netting about $3,598.

The better play: ladder six 13-week T-bills, rolling each at maturity until two months before closing, then move to a HYSA for final liquidity. Average yield ~4.28% investment basis, fully state-tax exempt. Same 18-month run earns roughly $4,328 — and California can't touch it. They net about $4,328 versus $3,598. The state-tax exemption alone is worth $730 on $80,000 over 18 months.

Why not CDs? They cannot afford to be wrong about the closing date. A bank CD broken three weeks early forfeits months of interest; a T-bill on the secondary market sells at prevailing price (close to face) any business day they need it. The state-tax savings are a bonus.

Why not I Bonds? The 12-month lock would not survive an accelerated closing schedule, and the $10K-per-person annual cap caps their I Bond use to $25K of the $80K plus monthly inflows.

Case 2: The early-retiree income ladder

Eleanor, 62, is two years into early retirement. She holds five years of living expenses ($240,000) in cash equivalents — the "bridge" that lets her ride out any equity bear market without selling stocks at the bottom. She is in a 24% federal bracket and lives in Florida (no state tax).

Wrong default: a single 4.10% HYSA balance. Yield is fine; the problem is concentration risk (one bank failure beyond the $250K limit) and 100% taxable income at federal rates.

Better play: a five-year Treasury ladder of $48,000 per rung — five separate T-notes maturing in years 1, 2, 3, 4, and 5. Each year one rung matures and refills her annual budget without selling equities. Today's rates: 4.05% (1y), 3.95% (2y), 3.90% (3y), 3.95% (5y).^[4] She has perfect FDIC-equivalent safety (the Treasury is the floor of the floor), known cash flow every July for the next five years, and zero reinvestment risk in any given year because only one rung resets annually.

I Bond overlay: Eleanor also buys $10,000 of I Bonds every May for five years. This is the inflation-hedged tail of the portfolio — if the next decade looks more like 2021–2023 than 2024–2026, the composite rate will protect her purchasing power in a way a fixed-coupon Treasury cannot. Florida has no state tax so the state-tax-exemption benefit is moot for her, but the federal tax deferral lets her shift income into lower-bracket years if needed.

Case 3: The high-bracket professional with a tax-bill problem

Marcus, 41, is a New York consultant earning $480,000 W-2 plus 1099 side income. He owes roughly $35,000 in estimated quarterly taxes that he holds in cash through the quarter and sweeps to the IRS on the due date. He had been parking the cash in a 4.10% HYSA.

The arithmetic: $35,000 × 4.10% × 0.25 (quarter) = $359 of pre-tax interest per quarter, taxed at his combined 37% federal + 10.9% New York bracket = 47.9%, netting $187.

The shift: 13-week T-bill at 4.28% investment yield, held to the quarterly due date. $35,000 × 4.28% × 0.25 = $374 pre-tax. Federal-taxable at 37% but state-tax-exempt at 10.9%, netting $236. That's $49 more per quarter, or about $196 a year, for the same effective duration and the same effective risk. The work to implement is opening a TreasuryDirect account once and clicking "buy" four times a year.

The case studies are small in dollar terms. They are large in pattern. Once you see the state-tax-exempt T-bill arbitrage, you stop putting near-term cash in HYSAs the moment your state bracket clears 7%.

Five traps that catch first-time buyers

1. The I Bond inflation lag

An I Bond's composite rate moves twice a year, but each individual bond's "next reset" happens six months after its issue date — not on May 1 or November 1. A bond bought June 15, 2026 will hold its 4.26% composite rate from June through November. The Treasury's published May / November dates are the dates new bonds get a new rate; existing bonds reset on their own anniversary schedule. Plan accordingly if you are timing a purchase around a CPI release.^[8]

2. The brokered-CD call risk

A 5-year callable CD at 4.50% looks like a steal in a 4.10% world. The catch: if rates fall enough that the issuing bank can refinance more cheaply, it will call your CD on the first call date and return your principal. You bought rate insurance for 5 years and you got it for the worst possible year. Always look for "non-callable" in the brokered-CD listing, or accept the call risk consciously.

3. The 4-week T-bill reinvestment treadmill

Auto-rolling 4-week T-bills feels like a 4.28% perpetual cash account. It is — for now. The week the Fed cuts, your next roll yields meaningfully less. There is no rate lock. If you need a known yield over a known horizon longer than a couple of months, ladder out further. If you are happy taking the Fed's policy rate plus a small premium for as long as the cash sits, the 4-week roll is fine.

4. The CD-vs-HYSA "I'll break it" delusion

Savers routinely tell themselves they will break the CD if rates rise. They almost never do — the friction is real, the penalty is real, and life happens. Either commit the cash to the lock or use a HYSA / T-bill structure that does not require you to be disciplined later.

5. The state-tax mistake on cross-state moves

If you live in Texas and move to California mid-year, your interest income is allocated by residency period. The state-tax-exempt T-bill is exempt everywhere; the CD interest you earned in Texas is exempt in Texas (because there is no state tax) but the CD interest earned after your California move date is California-taxable. Plan year-end repositioning around moves to high-tax states.

The decision tree

Five questions, in order. The first "yes" answer is your vehicle for that dollar.

1. Will I need this money within 12 months? Use a T-bill, a brokered CD with a known sell date, or HYSA. Skip I Bonds (12-month lock).
2. Do I live in a state with a top bracket above ~7%? Default to T-bills or I Bonds over CDs for the state-tax exemption.
3. Do I want explicit inflation protection? I Bonds are the only vehicle in this group with a CPI-U-linked rate reset. Cap is $10K per person per calendar year.
4. Do I want a known APY locked in for 1–5 years regardless of what the Fed does? CDs (preferably non-callable brokered). T-bills reset; I Bond inflation components reset.
5. None of the above — just maximum yield with no constraint? Top-shelf brokered CDs or 4-week T-bills are roughly tied at ~4.28%; pick by your liquidity preference.

An action checklist for this week

1. Open a TreasuryDirect account if you don't have one. The site is slow, the password-recovery process is painful, the security image is from 2004. Do it anyway. Without TreasuryDirect you cannot buy I Bonds, and the 12-month I Bond clock starts on purchase date — not on the day you decide to start.
2. Audit your state tax bracket. If it's above 7%, your default cash vehicle should be a T-bill or an I Bond, not a CD or HYSA. Re-rank your current cash holdings by after-state-tax yield.
3. Set up a 4-week T-bill auto-roll for short-cash. Both TreasuryDirect and most brokerages will let you auto-reinvest 4-week bills indefinitely with a single click. Replaces the HYSA for the dollars you don't truly need this week.
4. Buy this calendar year's I Bond allocation before December 31. The annual $10K personal cap does not roll forward. If you skip 2026 you cannot make it up in 2027. Even $5,000 buys a 30-year inflation-hedged tax-deferred position.
5. Look at non-callable brokered CDs for any 12–36 month money. Filter for "non-callable" explicitly. Lock the rate. The flat yield curve makes the 1-year vs 3-year decision almost a wash today; pick by horizon.
6. Confirm you are under FDIC limits everywhere. If a single bank holds more than $250K of yours across all accounts (checking + savings + CD), split before the next month-end. For larger balances, brokered CDs spread across multiple issuers solve this automatically.
7. Document the after-tax yield on every cash holding. The headline APY is not the right comparison number. Compute (yield × (1 − federal_rate − state_rate × is_taxable)) and rank.
8. Plug your numbers into our compound interest calculator and our bond yield calculator. Make the trade-off tangible.

Frequently asked questions