From what I understand, long term certificates of deposit (CDs) typically offer higher interest rates than short term CDs. They do that to give you a reason to lock up your money for a longer period of time.
However, right now I see many financial institutions are offering CDs with APYs that go lower as the CD term gets longer. Here is an example from Fidelity:
Is there any reason to put your money in a longer term CD that pays less interest than a shorter term CD?
Taking a longer-term CD with a lower interest rate could make sense if you expect CD interest rates to drop in the near future. Suppose you could get a 6-month CD with a 5.1% interest rate, or a 12-month CD with a 5% interest rate. If the 6-month CD interest rates fall to only 4% 6 months from now, you'd get 6 months at 5.1% and 6 months at 4% with two short-term CDs, which is worse than if you had locked up 5% for the full 12 months with one long-term CD.
Basically, there is no guarantee that you can get the higher shorter-term interest rate for the full duration of the longer-term CD. It can in some cases be advantageous to lock in a rate that is currently lower for a longer term, in the hopes that the rate becomes the relatively higher one in the future as short-term rates fall.
Note that many high-rate short term CDs are promotional offers, not renewable at that rate, and only available if you deposit "new money" (from another bank) to open them. The goal is to capture more of your banking business.
(Just opened a CD ladder and a higher-rate savings account myself, and ran into that marketing. Had to take the "normal" 6-month CD, a point lower than the special 6-month offer being advertised, if I wasn't willing to play multiple bank transfer games. And I wasn't willing to cheat past their clear intent, especially since this was a credit union.)
