Brokered CDs and TreasuryDirect Accounts

Want guaranteed returns with government backing? I Bonds currently pay 4.03% (November 2025 - April 2026) with inflation protection. Brokered CDs offer 4.25-4.65% APY with FDIC insurance you can expand across multiple banks from one account. These are not exciting investments, but they are powerful tools for capital preservation, emergency funds, and the conservative slice of your portfolio.

The durable lesson: TreasuryDirect gives you direct access to the safest securities in the world - backed by the US government with no default risk. Brokered CDs let you build FDIC coverage far beyond the standard 250,000 limit by spreading across multiple banks.

Brokered CDs: The Basics

What they are: CDs issued by banks but purchased through a brokerage (Fidelity, Schwab, Vanguard). You get bank-issued FDIC insurance without having to open accounts at each bank.

Current rates (May 2025): 4.25-4.65% APY depending on term

Minimum investment: Usually 1,000

FDIC coverage: 250,000 per bank

Early withdrawal: No penalty - but you must sell on secondary market (may be below face value if rates have risen)

Brokered CD vs. Bank CD

Brokered CD:

• Buy through brokerage
• No early withdrawal penalty (sell on secondary market)
• Often higher rates (banks compete)
• Easy to diversify across banks
• May lose value if you sell early when rates rise

Bank CD:

• Open directly with bank
• Early withdrawal penalty (typically 3-12 months interest)
• May have promotional rates for new customers
• Relationship benefits possible
• Guaranteed return if held to maturity

The practical point: Brokered CDs offer flexibility, bank CDs offer certainty. If you might need the money early, brokered CDs give you an exit (at market price).

FDIC Coverage Expansion Strategy

The problem: Standard FDIC insurance covers 250,000 per depositor, per bank

The solution: Buy brokered CDs from multiple banks through one brokerage account

Example:

• Buy 250,000 CD from Bank A
• Buy 250,000 CD from Bank B
• Buy 250,000 CD from Bank C
• Buy 250,000 CD from Bank D

Total coverage: 1,000,000 - all through one Fidelity account

The catch: You must track your own exposure. If you have personal accounts at Bank A, that plus your brokered CD at Bank A cannot exceed 250,000.

Secondary Market Risk

Scenario: You buy a 5-year brokered CD at 4.5%

Rates rise to 5.5%:

• New CDs pay more than yours
• Your CD is less attractive to buyers
• To sell early, you might receive 97-98 cents per dollar face value

Rates fall to 3.5%:

• Your CD pays more than new issues
• Your CD is more attractive to buyers
• To sell early, you might receive 102-103 cents per dollar face value

The point is: Hold to maturity for guaranteed return. Sell early only if you understand you may take a loss.

TreasuryDirect: Government Securities Direct

What it is: Government website where you buy Treasury securities directly from the US Treasury

Available products:

• T-Bills (4 weeks to 52 weeks)
• T-Notes (2 to 10 years)
• T-Bonds (20 to 30 years)
• I Bonds (inflation-protected savings bonds)
• EE Bonds (fixed-rate savings bonds)
• TIPS (marketable inflation-protected securities)

Tax benefit: Interest exempt from state and local taxes (federal tax still applies)

I Bonds: Inflation Protection

Current rate (November 2025 - April 2026): 4.03% composite

Rate components:

• Fixed rate: 0.90% (locked for life of bond)
• Inflation rate: 3.12% annualized (adjusts every 6 months)

Annual purchase limit: 10,000 per person (electronic)

Holding requirements:

• Must hold minimum 1 year
• Penalty of last 3 months interest if redeemed before 5 years
• After 5 years, no penalty

Why this matters: The fixed rate (0.90%) stays with your bond forever. If you bought I Bonds in the early 2000s with 3%+ fixed rates, those are still earning that fixed rate plus current inflation.

Best use case: Emergency fund, short-term savings, portion of bond allocation

EE Bonds: The 20-Year Guarantee

Current rate: 2.50% fixed

Special feature: Treasury guarantees EE Bonds will double in value after 20 years - regardless of stated rate

The math: If 2.50% seems low, the doubling guarantee equals 3.53% effective return if held 20 years.

Best use case: College savings (if held 20 years), conservative long-term allocation

Limitation: 10,000 annual purchase limit; poor choice if you might need the money before 20 years

Treasury Bills, Notes, and Bonds

T-Bills:

• Maturities: 4, 8, 13, 17, 26, 52 weeks
• Sold at discount, mature at par
• Example: Buy 100 bill for 97.50, receive 100 at maturity = 2.50 profit

T-Notes:

• Maturities: 2, 3, 5, 7, 10 years
• Pay interest every 6 months

T-Bonds:

• Maturities: 20, 30 years
• Pay interest every 6 months
• Most sensitive to interest rate changes

Where to buy:

• TreasuryDirect: No fees, direct from government
• Brokerage: May charge small markup, but easier to manage alongside other investments

Choosing Between Options

For short-term cash (less than 1 year):

• T-Bills at TreasuryDirect or through brokerage
• Money market funds (for daily liquidity)

For 1-5 year allocation:

• Brokered CDs (FDIC insurance, competitive rates)
• I Bonds (inflation protection, up to 10K)
• T-Notes (state tax exempt)

For long-term conservative allocation:

• EE Bonds if 20-year hold (doubling guarantee)
• T-Notes or T-Bonds (state tax exempt)
• Bond index funds (diversification, liquidity)

For emergency fund:

• I Bonds (after 1-year holding period)
• Money market + I Bonds combination

Common Mistakes

Ignoring state tax exemption on Treasuries In high-tax states (CA, NY, NJ), Treasury yields effectively higher than equivalent CD yields. A 4% Treasury in NY (8.82% state rate) is equivalent to ~4.35% CD.

Not maxing I Bond annual limit 10,000 per person, 20,000 for married couple. In inflationary environments, this is free inflation protection.

Selling brokered CD early without checking price Rising rates mean your CD trades below par. Check the secondary market price before assuming you can exit at face value.

Forgetting I Bond purchase timing I Bond rates reset May 1 and November 1. Time purchases to lock in favorable rates for 6 months.

Checklist

Before buying fixed income directly:

• Compare brokered CD rates vs. bank CD rates
• Check I Bond composite rate (updates May 1 and November 1)
• Calculate state tax benefit of Treasuries vs. CDs
• Ensure FDIC coverage does not overlap with existing bank relationships
• Understand liquidity needs (I Bonds 1-year lock, brokered CDs have secondary market)
• Consider EE Bond doubling guarantee if 20-year horizon

References

• TreasuryDirect.gov (2025). I Bond Rates and Purchase Limits.
• FDIC (2024). Deposit Insurance Coverage.
• Fidelity (2025). Brokered CD Guide.