U.S. Banks Brace For An Extended Deposit Cost Squeeze

Deposit costs are squeezing margins at US banks, and there is no near-term relief in sight, even as certificate of deposit (CD) repricing waves lock in higher funding costs well into 2027. As of June 26, 639 banks marketed rates above 3.5% on a one-year $10,000 CD, down from 1,006 a year ago but up from 583 since the end of the first quarter. Credit performance remains remarkably resilient, a testament to strong household balance sheets and the protective effect of locked-in, low-rate mortgages. By the end of the second quarter of 2026, deal activity had rebounded, with 45 transactions announced in the quarter compared to 36 in the first quarter and 40 in the year-ago period. Deposit costs are squeezing margins at US banks, and there is no near-term relief in sight, even as certificate of deposit (CD) repricing waves lock in higher funding costs well into 2027.