BAC Bonds: Types, Coupons, Ratings, and How to Buy

Bank of America bonds are debt securities issued by Bank of America Corporation (ticker BAC), and they come in four main flavors: senior unsecured notes, subordinated notes, hybrid contingent-convertible instruments, and sustainability bonds. All of BAC’s outstanding bond classes are rated investment grade, but where a specific bond sits in the payment hierarchy drives most of the difference in yield and risk. As of late 2024, the company had roughly $227 billion in long-term notes outstanding.¹

The Four Types of BAC Bonds

The legal structure of each bond determines where you stand if the bank runs into serious financial trouble. That priority of claims is the biggest single driver of both yield and risk across the lineup.

Senior Unsecured Notes

Senior unsecured notes sit at the top of the bondholder hierarchy, ranking above other bond classes though still below secured creditors and depositors. Because senior holders get paid first, these carry the lowest yields BAC offers. At the end of 2024, the bank had roughly $180 billion in senior notes outstanding, split between fixed-rate and floating-rate issues, plus about $17.5 billion in senior structured notes.¹ The volume reflects senior debt’s role as the bank’s primary funding tool.

Subordinated Notes

Subordinated notes rank below senior debt, meaning holders absorb losses before any senior creditor takes a hit. BAC had roughly $28 billion in subordinated notes outstanding at the end of 2024.¹ Much of this debt exists to satisfy Total Loss Absorbing Capacity (TLAC) rules, which require large banks to maintain a cushion of debt that regulators can write down or convert to equity during a crisis instead of drawing on public funds.² The higher risk of loss translates directly into higher yields than senior notes of similar maturity.

Hybrids and Contingent Convertibles

The riskiest category of BAC debt blurs the line between bonds and stock. Contingent convertible securities, often called CoCos, include contractual triggers tied to the bank’s financial health. If Bank of America’s Common Equity Tier 1 (CET1) capital ratio drops below the threshold specified in the bond’s terms, the instrument automatically converts into common equity or has its principal permanently written down. Either outcome means a sudden, potentially total loss for the holder.

The trigger mechanism exists because regulators want loss absorption to happen automatically, without waiting for a bankruptcy court. Read the prospectus carefully before buying. The exact capital ratio that triggers conversion or write-down varies by issuance.

Green and Social Bonds

Bank of America also issues green bonds and social bonds. From a credit-risk and legal-priority standpoint these function identically to standard senior debt, but proceeds are earmarked for specific purposes. Since 2013, BAC has raised approximately $7.4 billion through green bonds funding renewable energy projects and $1.5 billion through social bonds addressing issues like affordable housing and pandemic response.³ The credit risk matches a conventional BAC senior note.

Coupons, Calls, and Maturities

Beyond priority, specific terms in the bond agreement shape your cash flow, your exposure to interest rate changes, and how long you actually hold the bond.

Fixed, Floating, and Fixed-to-Floating Coupons

Fixed-rate bonds pay the same interest rate throughout their life, and their market price moves inversely with benchmark Treasury yields. When rates rise, the price of your fixed-rate bond falls. These make up the bulk of BAC’s outstanding debt.

Floating-rate notes adjust their coupon periodically, usually quarterly, based on the Secured Overnight Financing Rate (SOFR) plus a fixed spread. SOFR replaced LIBOR as the standard U.S. dollar benchmark after LIBOR ceased publication on June 30, 2023.⁴ Because the coupon resets with the market, floaters carry much less interest rate risk than fixed-rate bonds. They also provide less income predictability.

Fixed-to-floating notes pay a fixed rate for an initial period, often until the first call date, and then switch to a floating rate tied to SOFR for the remaining term. This structure shows up frequently in subordinated debt. If the bank doesn’t call the bond at the switch date, you move from a predictable fixed income stream to one that fluctuates with short-term rates.

Call Provisions

Most BAC bonds include a call provision allowing the bank to redeem the bond before its stated maturity date. When rates fall or the bank’s funding needs change, BAC can retire expensive older debt by calling it. That creates reinvestment risk for you: your principal comes back early, and you may not find a comparable yield in the current market.

Most callable BAC bonds include a non-call period, often several years, during which the bank cannot exercise the option. The first call date is spelled out in the prospectus and heavily influences pricing. Many senior notes also include a make-whole call provision, under which you receive the greater of par value or the present value of remaining coupon payments and principal, discounted at a rate tied to a comparable Treasury yield plus a small spread. Because this typically makes early redemption expensive for the issuer, make-whole calls get exercised far less often than standard calls.

Maturity Range

BAC issues debt across a wide maturity spectrum. Short-term notes maturing in under a year carry minimal price sensitivity to rate changes but offer the lowest yields. Longer-term bonds compensate you with higher yields for bearing greater duration risk and the possibility that the bank’s creditworthiness could shift over time. Subordinated and hybrid instruments tend to have longer maturities, partly because TLAC rules require certain minimum remaining terms for the debt to count toward the bank’s loss-absorbing cushion.

Credit Ratings

External credit ratings offer a quick shorthand for how the three major agencies assess Bank of America’s ability to pay its debts. As of February 2026, BAC’s ratings look like this:⁵

Senior unsecured debt: A1 (Moody’s), A- (S&P), AA- (Fitch)
Subordinated debt: A3 (Moody’s), BBB+ (S&P), A (Fitch)

All of these ratings fall within investment grade, which begins at Baa3 (Moody’s) or BBB- (S&P and Fitch). The threshold matters because many institutional investors, including pension funds and insurance companies, face internal or regulatory restrictions against holding bonds rated below it. That built-in demand helps keep BAC’s borrowing costs lower and its bonds more liquid.

Note the gap between senior and subordinated ratings. Each agency rates subordinated debt one to three notches below senior debt, reflecting its lower priority in the payment hierarchy. Ratings can change based on the bank’s financial performance, broader economic conditions, or regulatory shifts, and a downgrade tends to cause an immediate price decline in affected bonds.

Why the Regulatory Backdrop Matters

The Federal Reserve identifies Bank of America as one of eight U.S. Global Systemically Important Banks (G-SIBs).⁶ G-SIB status means heightened supervision, more frequent stress tests, and extra capital requirements above what smaller banks face. As of March 31, 2025, BAC reported a CET1 ratio of 11.8%, above its 10.0% requirement.⁷ That cushion represents the distance between current capital levels and the point where regulators might start restricting dividend payments or where CoCo trigger events could become a concern.

TLAC rules layer on top of the capital rules, requiring G-SIBs to hold enough equity and eligible long-term debt that regulators can recapitalize the bank during a crisis through “bail-in” rather than taxpayer-funded bailout.² TLAC-eligible debt must be subordinated to ordinary liabilities like deposits and structured products, which is one reason subordinated bonds exist in the quantities they do.

The practical takeaway: regulation makes senior BAC bonds safer by forcing the bank to hold thick capital buffers. But that same regulation makes subordinated and hybrid bonds riskier by design, because those instruments are the mechanism through which losses get absorbed. The yield gap between senior and subordinated BAC notes largely reflects this architecture.

How to Buy Bank of America Bonds

Most retail investors purchase corporate bonds through a brokerage account. The standard minimum denomination for a BAC bond is $1,000 face value, and that is usually the minimum purchase amount. Some brokerages require higher minimums on certain issues, and thinly traded bonds can be harder to source in small quantities. Corporate bond trades settle T+1, meaning the transaction finalizes one business day after execution.⁸

Before buying any BAC bond, review its prospectus, available through the SEC’s EDGAR system or Bank of America’s investor relations page. The prospectus spells out the coupon rate, maturity date, call provisions, and any special features like CET1 triggers or fixed-to-floating coupon switches. If you want exposure to BAC’s credit without picking individual bonds, investment-grade corporate bond ETFs and mutual funds offer diversification and lower minimum investment amounts.

Check TRACE Before You Trade

Corporate bonds trade over-the-counter rather than on an exchange, so price transparency has historically been weaker than for stocks. FINRA’s Trade Reporting and Compliance Engine (TRACE) narrows that gap by requiring dealers to report corporate bond transactions within 15 minutes of execution.⁹ You can look up recent trade prices for any BAC bond using FINRA’s free Fixed Income Security Lookup tool by searching the bond’s CUSIP number.¹⁰ Checking recent TRACE data before you place an order gives you a realistic picture of where the bond is actually changing hands.

Focus on Yield-to-Worst

When comparing bonds, pay attention to yield-to-worst rather than the stated coupon. Yield-to-worst accounts for the possibility that the bond gets called at the earliest possible date, giving you a more conservative estimate of your expected return. For callable bonds trading above par, the yield-to-call will be lower than the yield-to-maturity, and yield-to-worst picks the less favorable scenario.

Watch the Credit Spread

A bond’s price reflects the relationship between its yield and the yield on a Treasury security of comparable maturity. The difference, measured in basis points, is called the credit spread and represents the premium you earn for taking on Bank of America’s credit risk instead of holding a government bond.¹¹ A widening spread signals the market perceives more risk at BAC or less appetite for corporate credit generally. A narrowing spread suggests improving confidence. Trading volume for individual corporate bonds is much lower than for stocks, and you may encounter wider bid-ask spreads on less actively traded BAC issues.

How BAC Bond Interest Is Taxed

Interest from Bank of America bonds is taxed as ordinary income at the federal level. The Internal Revenue Code defines gross income to include interest from all sources.¹² Unlike municipal bond interest, there is no federal exemption for corporate bond interest. Your brokerage will report the interest on a 1099-INT each year, and you owe tax on it regardless of whether you reinvest the payments.

If you buy a BAC bond at a discount to its face value, whether in the secondary market or as an original issue discount (OID), the tax treatment gets more complicated. For bonds issued after 1984, OID must be included in your gross income as it accrues each year, even though you haven’t received the cash yet. Your cost basis rises by the OID you report, reducing your capital gain (or increasing your capital loss) when you eventually sell or the bond matures.¹³ A de minimis exception applies if the total OID is less than 0.25% of the redemption price multiplied by the number of full years to maturity.

If you sell a bond before maturity for more than your adjusted basis, you realize a capital gain taxed at rates that depend on how long you held it. State income taxes on corporate bond interest vary widely, from zero in states without an income tax to over 10% in the highest-tax states.

1
U.S. Securities and Exchange Commission. Bank of America Corporation Annual Report 2024
2
Bank for International Settlements. TLAC Executive Summary
3
Bank of America Corporation. Sustainable Issuances
4
Federal Reserve Bank of New York. Transition from LIBOR
5
Bank of America Corporation. Credit Ratings
6
Board of Governors of the Federal Reserve System. Global Systemically Important Banks
7
Bank of America Corporation. Bank of America Comments on Stress Test Results
8
FINRA. Understanding Settlement Cycles: What Does T+1 Mean for You?
9
FINRA. Trade Reporting and Compliance Engine (TRACE)
10
FINRA. Fixed Income Data
11
FINRA. Spread the Word: What You Need to Know About Bond Spreads
12
Office of the Law Revision Counsel. 26 U.S. Code 61 – Gross Income Defined
13
Internal Revenue Service. Publication 1212, Guide to Original Issue Discount (OID)