It hasn't been a great time for preferred securities. Yet Bank of America sees opportunity in some areas of the market. The ICE BofA Core Plus Fixed Rate Preferred Securities index, which has an effective yield of 6.71%, has seen a total return of -7% in the last six months. The higher-for-longer interest rate environment weighed on the space in the third quarter, Bank of America said in a note earlier this month. It was dragged down by longer duration, fixed rate and more credit-like structures, analyst Michael Youngworth wrote. He's cautious on preferreds overall due to the lukewarm outlook on the banking sector, as well as the fact that higher-for-longer interest rates may continue to pressure longer-duration assets. "Having said that, we think that certain names and pockets of the market may offer relative value," Youngworth said. Preferreds have characteristics of both bonds and equities. They trade on exchanges like stocks but have a face value and pay dividends like bonds. Also similar to bonds, when the value of the preferred security goes down, yields rise. About three-quarters of the securities are issued by financial firms. While Bank of America thinks preferreds with $1,000 par value look comparatively cheap compared with $25 par valued ones, those tend to be targeted to institutional investors. However, the bank also sees opportunity in some of the smaller-denominated securities. Here are some of the $25 par fixed-rate preferreds Bank of America recommends, which have at least two years of call protection. — CNBC'S Michael Bloom contributed reporting.
