Maturity

The date on which a bond repays its par value and the contract ends. Bonds are commonly grouped as short, intermediate or long by how far away that date is.

Example

A bond maturing in seven years pays its remaining coupons over that period and then 1,000 per unit on the final date.

Important

Maturity is the single largest driver of how much a bond price moves when yields change. A 30-year bond and a 2-year bond of the same issuer and coupon are not variants of one holding.

Related terms

  • Bond — A loan made to a government, agency or company, packaged so it can be transferred to somebody else. It obliges the issuer to pay stated interest on stated dates and to repay a stated sum at maturity.
  • Duration — The present-value-weighted average time until a bond's cash flows are received (Macaulay duration), and by extension the measure of how much its price moves when yields change. Modified duration is Macaulay duration divided by one plus the yield.
  • Interest-rate risk — The risk that prevailing yields move and reprice a bond you already hold, because its fixed coupon must now compete with newly issued bonds paying a different rate.
  • Yield curve — The set of yields available across maturities for the same kind of issuer at one moment, usually plotted from shortest to longest.

Lessons that explain it

  • A bond is a loan with a contract: what you are owed, and by whom — Four facts define a bond - issuer, par, coupon, maturity - and all four are contractual. You are a creditor, ranking ahead of every shareholder. (10 min)
  • A convertible note is a loan that usually becomes shares, at the better of two prices — A convertible note is debt that converts into equity at a future round, typically at the lower of a discounted price or a capped price, with interest added to the amount converting. (12 min)

All 578 terms in the Investing glossary