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Bank of America Preferred Stock: A Defensive Strategy for Fixed Income

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  Published in Stocks and Investing on Wednesday, February 11th 2026 at 2:39 GMT by Seeking Alpha
      Locales: North Carolina, New York, UNITED STATES

Wednesday, February 11th, 2026 - As the Federal Reserve navigates a complex economic landscape, investors are increasingly focused on safeguarding their fixed-income investments from the potential impacts of fluctuating interest rates. Amidst a flattening yield curve and uncertainty surrounding the future path of monetary policy, Bank of America (BAC) preferred stock offerings are emerging as a potentially valuable tool for mitigating risk and securing attractive yields.

The Shifting Landscape of Fixed Income

The yield curve, a graphical representation of yields on U.S. Treasury bonds across various maturities, is currently exhibiting a flattening trend. This phenomenon typically signals investor apprehension about long-term economic growth and expectations that the Federal Reserve may soon curtail its interest rate hikes. In such an environment, traditional fixed-income instruments like bonds become vulnerable. Rising interest rates generally lead to a decline in bond prices, eroding returns for investors.

Preferred stocks, however, present a distinct alternative. They combine characteristics of both stocks and bonds, offering a fixed dividend payment (similar to a bond's coupon) but with features that can help cushion against rising rate pressure. Bank of America, a leading financial institution, has been actively issuing preferred stock, attracting attention from investors seeking stability and income.

The Appeal of Callable Preferreds

A key feature of many Bank of America preferred stock offerings is their callability. This provision grants Bank of America the right, but not the obligation, to redeem the preferred shares at a predetermined price, usually around their par value. This call feature acts as a critical component of downside protection. In a rising interest rate environment, the likelihood of Bank of America exercising this call option increases. Why? Because the bank can then refinance its capital at lower rates, making it economically advantageous to redeem the higher-yielding preferred shares. This prevents investors from experiencing substantial losses as the market value of the preferred stock would be capped near the call price.

Furthermore, Bank of America's strong financial position enhances the reliability of this call feature. The bank's solid capital base and profitability mean it is well-equipped to meet its obligations and exercise the call option when appropriate. This provides an additional layer of reassurance for investors.

Decoding Specific Series: A Snapshot (February 11, 2026)

As of today, several Bank of America preferred stock series are available, each with unique characteristics:

• BACL.PQ: Currently offering a fixed dividend rate of 6.20%, with a maturity date of April 17, 2026. The call date was April 17, 2021, meaning it is currently nearing its maturity and the call option is no longer relevant.
• BACM.PQ: A floating-rate preferred stock, currently tied to 3-month Libor plus 150 basis points. The call date was November 17, 2020, making this series similar to BACL.PQ - approaching maturity.
• BACN.PQ: Features a fixed rate of 5.875% and matures on November 17, 2026. The call date was November 17, 2020, and like the other two, is approaching maturity.

(Please note: Prices and yields are dynamic and subject to market fluctuations. Investors should consult current pricing information before making any investment decisions.)

Beyond Protection: Attractive Yields in a Competitive Market

Beyond interest rate protection, Bank of America preferreds often provide competitive yields compared to other fixed-income securities with similar risk profiles. The current economic climate - the flattening yield curve combined with the possibility of a Fed policy shift - is making these yields particularly appealing. Investors are seeking alternatives to traditional bonds that can deliver stable income in a potentially volatile environment.

A Defensive Strategy for Fixed Income Portfolios

Preferred stocks, when strategically integrated into a fixed-income portfolio, can act as a defensive maneuver. While not entirely immune to interest rate risk, the call feature provides a buffer that traditional bonds lack. This is especially crucial in a rising-rate scenario. The higher yields offered by preferreds also serve as a potential income boost for investors.

Looking Ahead

Bank of America's preferred stock offerings represent a potentially compelling opportunity for investors seeking a combination of interest rate protection and attractive yields. As the Federal Reserve continues to assess the economic landscape and refine its monetary policy, Bank of America preferreds may prove to be a valuable addition to a diversified fixed-income portfolio. However, investors must remember to conduct thorough due diligence, considering their individual risk tolerance and financial goals before making any investment decisions.