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In times of economic uncertainty, many people look to fixed-income investing strategies such as bond ladders or CD ladders. These can provide cash flow that may help cushion against financial setbacks, such as a job loss or a stock market downturn.

But which one of those fixed-income investments is better: bonds or CDs? That’s a subjective question.

CDs might be more familiar, but short-term Treasurys such as T-bills (Treasury securities with a maturity of 1 year or less) are paying comparable yields right now — sometimes even higher yields. Here’s a breakdown of T-bills vs. CDs in terms of yield, tax treatment, flexibility and ease of use.

The yield on the 1-year T-bill hasn’t dipped below 4% since the beginning of May, and it has spent much of the month above 4.1%.

That’s more than twice as high as the national average rate for 1-year CDs.

There are a few 1-year CDs that pay more than the 1-year T-bill (you can compare all CD rates in NerdWallet’s CD roundup). Still, it’s worth noting that CD interest is subject to both federal and state tax, where applicable. T-bills, on the other hand, aren’t subject to the latter.

All interest from Treasury securities, including T-bills, is state-tax-exempt. If you live in a state with high income taxes, such as New York, that effectively bumps up the tax-equivalent yield on T-bills by about 0.25 percentage points.

If you’re putting $5,000 into a CD or T-bill, this only works out to a few dollars’ difference. But it still means T-bills may have a higher after-tax yield than most of the highest-yielding CDs for you. Plus, it can save you the hassle of reporting a little bit of extra interest income to the state at tax time.

One thing that T-bills and CDs have in common: Withdrawing your money from either vehicle before it reaches maturity may have a cost.

For CDs, this is an early withdrawal penalty. This typically means forfeiting some number of months or years of interest, although some CD early withdrawal penalties can also eat into the principal, leaving you with less total money than you put in. Regardless, the early withdrawal penalties for a CD should be clearly stated when you open a CD through a bank or credit union.

The cost of pulling money out of a T-bill early is a bit more complicated. T-bills are tradable securities; they don’t just have yields, they also have prices. If you pull your money out of a T-bill early (in other words, if you sell a T-bill before maturity), the market price of the T-bill may be higher or lower than what you paid for it.

If it’s higher, you’ll earn a profit, but that profit will be subject to federal short-term capital gains tax come tax time. If it’s lower, you won’t get back all the money you put in (although you may be able to deduct the difference from your taxes as a short-term capital loss).

When interest rates go down, due to Federal Reserve action or market fluctuations, that tends to increase the price of Treasury securities. When rates go up, that tends to push Treasury prices down. This effect, known as interest rate risk, moves the prices of longer-dated Treasurys more than short-term bills, although it affects both.

So far, we’ve talked about a lot of advantages that T-bills have over CDs, especially during this time of elevated Treasury yields. But CDs do have at least one important advantage, especially for investing beginners: They’re easier to use and more widely-available. If you have any sort of account with a bank or credit union, chances are it offers CDs.

Investing in T-bills, on the other hand, may have more of a learning curve; it may require opening a new account of some kind.

You’ll either need a brokerage account that offers bonds, or a Treasury account (a new type of savings-account-like product that automatically invests in T-bills for you. Of the brokers NerdWallet reviews, only Public offers a Treasury account.)

CDs have simple workings: you can open them through your bank (sometimes even through your banking app). They pay a fixed amount of interest, typically all at once at the end of the CD term. And they have easy-to-follow rules; they’re designed to be left alone for their term. It’s hard to accidentally make an early withdrawal from a CD without running into some kind of warning about the penalties you’ll incur.

» MORE: Best CD rates

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On May 16, Moody’s Ratings, one of the “Big Three” credit rating agencies along with S&P Global Ratings and Fitch Group, downgraded the U.S. government’s credit rating. It dropped the U.S. government from its highest rating, Aaa, to its second-highest rating, Aa1.

Moody’s was the last of the Big Three agencies to downgrade the U.S. government’s debt. S&P was the first, having downgraded the U.S. from its highest rating to its second-highest rating during 2011 negotiations about raising the debt ceiling. Fitch did the same in 2023 amid another debt ceiling crisis.

As a result, the U.S. government no longer holds a perfect credit rating from any of the major credit rating agencies. Here’s why, and what it means for the U.S. economy and for investors.

In its rating downgrade announcement, Moody’s noted that the U.S. government has higher levels of debt, and higher interest expense, than other governments that have a perfect credit rating. It also expressed a lack of confidence that the U.S. will get its national debt under control any time soon.

“We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” the agency wrote.

The line about “current fiscal proposals under consideration” is likely a reference to the One Big Beautiful Bill Act — a GOP-backed spending bill which passed the House of Representatives on May 22. According to the Congressional Budget Office, the bill would add more than $3 trillion to the national debt over the next decade, mostly via tax cuts.

The Moody’s downgrade follows the precedent set by S&P and Fitch, which both knocked the U.S. down one rating due to concerns about its rising national debt.

The market for Treasury bonds felt the most immediate impact of the downgrade. On Wednesday, May 21, the U.S. government held an auction for $16 billion worth of new 20-year Treasury bonds — the first auction for that type of bond since the Moody’s downgrade.

Investors demanded much higher yields than expected at that auction, causing the 20-year Treasury yield to briefly rise above the psychologically-significant 5% level. Other types of Treasury securities, such as the 30-year bond and the 1-year bill, also saw their yields creep up after the auction.

Treasury yields rise and fall over time, but the yield on a specific Treasury security is fixed over the life of that security, assuming the buyer doesn’t resell it. As a result, when Treasury yields go up, even temporarily, that increases the U.S. government’s interest expense — the cost of making payments on the national debt.

Interest expense accounted for 14% of total U.S. government expenditures in 2024. It’s the second-largest line item in the federal budget after Social Security, and is higher than government spending on Medicare or national defense.

If that number continues to increase due to rising debt levels, rising yields or credit downgrades, it could severely constrain the government’s ability to spend money (for example, on new social programs) or float new tax cuts in the future.

It’s important not to catastrophize what the Moody’s downgrade means for your finances. Moody’s noted in its downgrade announcement that the U.S. government is still in a very strong financial position.

“The US economy is unique among the sovereigns we rate. It combines very large scale, high average incomes, strong growth potential and a track-record of innovation that supports productivity and GDP growth,” the announcement stated. “While GDP growth is likely to slow in the short term as the economy adjusts to higher tariffs, we do not expect that the US' long-term growth will be significantly affected.”

“In addition, the US dollar's status as the world's dominant reserve currency provides significant credit support to the sovereign. The credit benefits of the dollar are wide-ranging and provide the extraordinary funding capacity that helps the government finance large annual fiscal deficits and refinance its large debt burden at moderate and relatively predictable costs,” Moody’s wrote.

With that in mind, there’s a glass-half-full perspective one could take on the recent downgrade: Treasury bonds are still very safe investments, and they now pay a little more interest than they used to.

» MORE: Best online brokers for bonds

Best CD Rates for June 2025: Up to 4.50%

NerdWallet’s Best CD Rates roundup features CDs with minimum deposits as low as $500, terms as short as 6 months or as long as 5 years, and rates up to 4.50%. Learn more here.

Below is a table of blue-chip stocks that are reporting earnings in June, with the expected dates and average analyst estimates for their upcoming earnings reports.

We’ve filtered the list for companies with a market capitalization of at least $100 billion. These are high-volume stocks of which earnings reports are often major trading events for options traders and day traders.

Source: Nasdaq.com. Data is current as of June 2, 2025, and intended for informational purposes only.

» See our picks of the best day trading platforms.

Neither the author nor editor owned positions in the aforementioned investments at the time of publication.