Bond maturity is the time when the bond issuer must repay the original bond value to the bond holder. The maturity date is set when the bond is issued and the bond holder can sell before this time if they want to. Bonds can be short, medium or long term, which refers to the length of maturity.
Why is the maturity of a bond important?
Bonds with longer maturities generally offer higher yields because investors demand more for tying money up. This whipsawing of bond prices as rates change is more pronounced with long maturities because the investor will experience the below- or above-market yield for longer.
Can you lose money with bonds?
Bonds are often touted as less risky than stocks — and for the most part, they are — but that does not mean you cannot lose money owning bonds. Bond prices decline when interest rates rise, when the issuer experiences a negative credit event, or as market liquidity dries up.
What happens to the bond when it matures?
Bond variables — such as interest, price and yield type — in place at the time of purchase determine what occurs on the bond’s maturity date. Usually, the bond issuer repays the bond principal to the investor on the maturity date. However, the issuer and the bond purchaser can make alternative agreements.
When is the maturity date for a bond?
The maturity date for a bond can be as far off as 30 or 100 years. Maturity dates for short-term bonds range up to three years.
How can I find out if my savings bond has matured?
Find the maturity date. To see if your bond has matured, start by looking at the series name on the upper right corner of the bond.
What does it mean when a convertible bond matures?
Convertible bonds, which are corporate bonds, allow a bond purchaser to convert the bond into common stock in the company in lieu of a cash payment. Some bonds are designed to compensate investors, such as those who purchase mortgage-backed bonds, based on the average life of bonds instead of the listed maturity dates.
