The Resurgence of Long-Term CDs in 2025: A Strategic Move for Yield-Seeking Investors

In 2025, the U.S. banking sector is witnessing a quiet but significant shift: the revival of long-term certificates of deposit (CDs) as a cornerstone of institutional deposit strategy. This resurgence is driven by a confluence of factors, including the Federal Reserve's cautious approach to rate normalization and banks' aggressive pursuit of stable funding sources. For investors, the current environment presents a rare opportunity to lock in elevated yields while navigating the complexities of a tightening monetary policy cycle.

The Fed's Role in Shaping CD Dynamics

The Federal Reserve's June 2025 projections underscore a pivotal moment in the interest rate cycle. With the federal funds rate expected to remain in the 3.9–4.4% range for the remainder of the year, banks have little incentive to reduce CD rates aggressively. This stability has allowed institutions to maintain—and even amplify—high-APY offers on long-term CDs. For example, Northern Bank Direct is currently offering 4.50% APY on six-month CDs, while Marcus by Goldman Sachs provides 4.40% on six-month terms. These rates, which far exceed the national average for savings accounts (0.38% as of July 2025), reflect banks' strategic alignment with the Fed's rate trajectory.

The Fed's decision to pause rate cuts—despite growing speculation about a potential reduction in September—has created a window for banks to secure low-cost deposits. By offering elevated CD rates, institutions are effectively locking in customer funds at a time when the cost of capital remains relatively low. This dynamic is particularly advantageous for banks, as it allows them to maintain liquidity while avoiding the need to raise short-term borrowing costs.

Institutional Behavior: Aggressive Pricing and Product Innovation

Banks are leveraging this environment to innovate in ways that prioritize depositor retention and yield maximization. Online institutions, in particular, have emerged as leaders in this space. For instance, Marcus by Goldman Sachs and E*TRADE have introduced “bump-up” CDs, which allow savers to request rate adjustments if market conditions improve during the term. Similarly, Varo Bank and Betterment have launched promotional campaigns offering limited-time APYs as high as 5.00% on select terms. These strategies not only attract new customers but also incentivize existing depositors to extend their commitments.

Traditional banks, meanwhile, are adopting a more defensive posture. Institutions like Morgan Stanley Private Bank and First National Bank of America are emphasizing no-penalty CDs and flexible maturity options to mitigate the risk of early withdrawals. This approach reflects a broader industry trend: the recognition that liquidity constraints could become a critical issue if the Fed's rate cuts materialize later in the year.

Strategic Implications for Investors

For yield-seeking investors, the current CD landscape offers both opportunities and risks. The key lies in understanding how institutional behavior and Fed policy intersect to shape returns. Here are three strategic considerations:

1. Lock In Rates Before Anticipated Cuts
   The CME Group's FedWatch Tool indicates a 57% probability of a rate cut in September 2025. While the Fed has not officially signaled a reduction, banks are already adjusting their pricing models in anticipation. Investors should prioritize opening long-term CDs with the highest APYs available today, as these rates are likely to decline in the coming months. For example, a 19-month CD offering 4.60% APY at Wealthfront or Betterment could provide a hedge against future rate erosion.

2. Diversify Term Structures to Balance Liquidity and Yield
   A CD laddering strategy remains optimal in this environment. By spreading investments across multiple terms—such as 6-month, 12-month, and 18-month CDs—investors can ensure periodic access to liquidity while maintaining exposure to high yields. This approach also allows for reinvestment at potentially higher rates as CDs mature.

3. Monitor Institutional Promotions and Minimum Requirements
   While online banks dominate the high-APY space, traditional institutions are not without advantages. For instance, Morgan Stanley Private Bank offers no minimum deposit requirements on its short-term CDs, making it accessible to a broader audience. Conversely, institutions like Salem Five Direct require $10,000 minimum deposits for competitive rates, which may limit their appeal for smaller savers.

The Road Ahead: Navigating Uncertainty

The Fed's June 2025 projections suggest a gradual decline in rates through 2027, with the long-term target stabilizing at 3.0%. This trajectory implies that the current high-APY CD environment is temporary. Investors must act decisively to capitalize on today's rates while remaining agile enough to adapt to future shifts.

Institutional behavior will play a critical role in shaping the next phase of this cycle. As banks continue to refine their deposit strategies, savers should stay informed about product innovations and rate adjustments. The resurgence of long-term CDs in 2025 is not merely a response to Fed policy—it is a calculated move by institutions to secure funding in an era of uncertainty. For investors, the lesson is clear: align with institutional incentives to maximize yield while mitigating the risks of a shifting rate environment.

In conclusion, the 2025 CD market represents a unique intersection of monetary policy and institutional strategy. By understanding these dynamics, investors can position themselves to benefit from elevated yields while navigating the complexities of a tightening cycle. The time to act is now—before the window closes.