Quick wins for a faster PC:
Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →iTechGuides is reader-supported. When you buy through links on our site, we may earn an affiliate commission. As an Amazon Associate I earn from qualifying purchases. Learn more
Bank of America reported a very large decline in the market value of its securities during the third quarter of 2023 as higher interest rates reduced the prices of older, lower-yielding bonds. The decline was primarily unrealized: it showed what the portfolio could have fetched in the market, not an immediate cash loss or proof that the bank was insolvent.
What happened to Bank of America’s bond portfolio
Reuters reported on October 17, 2023, that Bank of America’s securities carried $131.6 billion in unrealized losses in the third quarter, based on the bank’s filing. The same report said the bank held about $603 billion of held-to-maturity securities, down from approximately $614 billion in the second quarter.
Those figures describe a mark-to-market decline: securities purchased when yields were lower were worth less at prevailing market yields in Q3 2023. A bond can show that decline on paper while still paying its scheduled interest and ultimately returning principal at maturity, assuming the issuer remains able to pay and the bank does not need to sell early.
The Tool Desk
Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →| Q3 2023 item | Reported amount | What it represents |
|---|---|---|
| Unrealized losses on securities | $131.6 billion | Market-value decline reported from Bank of America’s filing, as reported by Reuters on October 17, 2023; not automatically a cash loss |
| Held-to-maturity securities | About $603 billion | Portfolio classified as intended to be held until maturity, down from about $614 billion in Q2 2023 |
| Net income | $7.8 billion | Profit reported for Q3 2023 by the Associated Press on October 17, 2023 |
| Net interest income | $14.4 billion | Q3 2023 revenue from interest earned and paid, as reported by the Associated Press |
Why higher interest rates push bond prices down
Fixed-rate bonds make contractual interest payments set when they are issued. When market yields rise, newly issued bonds offer higher payments, so an older bond with a lower coupon must sell for less to provide a comparable return to a new buyer. The SEC’s investor bulletin on interest-rate risk describes this inverse relationship.
#1 Best Overall
The size of the price change depends heavily on duration. Longer-duration bonds have more cash flows far in the future, making their prices more sensitive to a change in yields. Bank of America accumulated substantial securities during the period of unusually low rates; the Federal Reserve’s subsequent tightening cycle therefore reduced the market value of many of those holdings.
Senator Elizabeth Warren summarized the political concern in a September 13, 2023, letter to the Financial Stability Oversight Council: “Bank of America, for example, has racked up over $100 billion of losses from money it poured into bonds three years ago.” That description referred to the same broad phenomenon, while the bank’s filing and Reuters account provide the Q3 figure and accounting context.
How an unrealized loss becomes a real loss
Unrealized losses are valuation changes
An unrealized loss exists because the securities’ current market value is below their purchase price or carrying value. If the bank continues receiving coupons and holds the bonds until they mature, it may receive the scheduled principal rather than selling at the temporarily lower market price.
A sale crystallizes the loss
If Bank of America sells a security below its carrying value, the difference becomes a realized loss. The same can happen indirectly when the bank must raise cash quickly and cannot wait for the securities to mature or for market yields to fall.
Why held-to-maturity and available-for-sale classifications matter
Bank accounting separates securities according to management’s intent and ability to hold them. The Q3 2023 Form 10-Q, filed with the SEC on October 31, 2023, provides the portfolio classifications, fair values, accumulated other comprehensive income and interest-rate-risk disclosures.
| Classification | How rate-driven value changes are generally presented | Key risk |
|---|---|---|
| Held-to-maturity | Carried using the accounting basis for securities the bank intends and is able to hold to maturity; temporary market-price changes do not flow through earnings in the same way as a sale | A forced sale, funding need or credit problem can prevent the bank from waiting for maturity |
| Available-for-sale | Fair-value changes are generally reflected outside earnings in accumulated other comprehensive income, subject to applicable accounting and regulatory treatment | Sales can turn the market-value decline into a realized loss, and valuation changes can affect reported capital measures |
The classifications do not make market risk disappear. They determine where the effect is recorded and whether the bank can reasonably avoid selling. Regulatory capital treatment can differ by institution and rule, so a headline unrealized-loss figure cannot by itself be translated into a specific capital shortfall.
Are these losses like the losses that helped bring down Silicon Valley Bank?
The underlying interest-rate mechanism is similar: rising yields reduce the value of bonds purchased at lower yields. The decisive question is what happens next. A bank that has stable funding and can hold securities to maturity may avoid crystallizing the full mark-to-market decline. A bank facing rapid deposit withdrawals may have to sell securities, turning a paper loss into a cash loss and potentially weakening confidence further.
That is why comparisons based only on the largest dollar loss are misleading. A useful comparison aligns the quarter and accounting basis, then examines the following factors:
- the split between unrealized and realized losses;
- the proportions of held-to-maturity and available-for-sale securities;
- the portfolio’s duration and average coupon;
- deposit stability and access to other sources of liquidity;
- the effect of valuation changes on tangible and regulatory capital; and
- whether the bank can hold the securities until maturity.
Bank of America’s Q3 number alone does not establish that depositors were at risk or that the bank was insolvent. Depositor risk would depend on liquidity, capital, funding behavior, supervision and the bank’s ability to meet withdrawals without forced sales.
Rank #4
How the bank could report profits while carrying the losses
The securities mark was only one part of the quarter’s results. The Associated Press reported $7.8 billion in net income and $14.4 billion in net interest income for Q3 2023. Higher rates can increase the interest earned on loans and other variable-rate assets even as they reduce the market value of older fixed-rate bonds. Profitability and the value of a bond portfolio therefore move through different channels and must be analyzed separately.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What happens if interest rates stay high
If yields remain elevated, the market values of older low-coupon bonds can remain below their original levels for an extended period. The bank may continue collecting contractual interest and receive principal at maturity, but its unrealized valuation marks may not recover quickly.
Do these 3 things before closing this tab:
1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsIf market yields later fall, prices of those fixed-rate bonds generally rise, reducing the unrealized loss. If yields stay high while deposits leave and liquidity needs increase, the risk is that the bank must sell before maturity. Credit deterioration by a bond issuer would create a separate problem from the interest-rate mark and could prevent full repayment.
How to read the $131.6 billion headline
The most accurate reading is: Bank of America’s securities were worth $131.6 billion less at prevailing Q3 2023 market prices than their relevant accounting or purchase values, according to Reuters’ account of the filing. It does not mean the bank wrote a $131.6 billion check, lost that amount of cash during the quarter or stopped earning money. The number is a warning about interest-rate exposure and potential liquidity risk, not a standalone insolvency diagnosis.
The Q3 filing provides the appropriate detail for evaluating that exposure, including security classifications, fair values, accumulated other comprehensive income and interest-rate-risk disclosures. No reliable published figure attributes a separate Q3 loss amount to a specific bond-maturity bucket beyond the reported held-to-maturity total, so a more precise maturity breakdown should not be inferred from the headline.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
