Bank of America's Growth Pledge Undermined by Wrong-Way Rate Bet

Bank of America's decision to invest heavily in long-dated Treasuries and mortgage bonds at low rates during the pandemic has backfired as interest rates have risen, causing the bank to lag behind its peers in terms of earnings and stock performance. The bank's securities portfolio, the largest among the four biggest banks, is concentrated in low-yielding debt that comes due after 10 years. While the lopsided portfolio is weighing on earnings, it is not considered an existential threat due to the bank's large deposit base. Bank of America executives expect the situation to improve as the portfolio shrinks and the remaining bonds become shorter in duration.