Maturity date

Maturity date is the date on which the principal amount of a debt instrument—such as a bond, note, or loan—becomes due and payable to the holder, marking the end of the instrument's life and the issuer's obligation to repay the borrowed amount (Fabozzi F.J. 2013, p.12)^[1]. You buy a 10-year Treasury bond on January 15, 2025. The maturity date is January 15, 2035. On that day, the U.S. government sends you the bond's face value—$1,000, say—regardless of what you paid for it or what interest rates have done since. Until then, you collect interest payments. At maturity, you get your principal back and the obligation ends.

Maturity date is fundamental to fixed-income investing. It determines when cash flows occur, how sensitive the bond is to interest rate changes, and how to position portfolios for different time horizons. Short-term instruments mature in under a year; long-term bonds may mature in 30 years or more. A few securities, called perpetuals, have no maturity at all—they pay interest forever.

Characteristics

Maturity date defines key features:

Principal repayment

Face value return. At maturity, the issuer repays the bond's par or face value to the holder, typically $1,000 per bond in the U.S. corporate and Treasury markets^[2].

Full discharge. Once the maturity payment is made, the issuer's obligation to the bondholder ends. No further payments are due.

Final interest payment

Last coupon. The final interest payment is made on or near the maturity date, along with the principal repayment.

Clean ending. All obligations—interest and principal—are settled at maturity.

Maturity classifications

Debt instruments are classified by maturity length:

Short-term

Under one year. Money market instruments—Treasury bills, commercial paper, certificates of deposit—typically mature in less than one year^[3].

Lower risk. Short maturities mean less time for things to go wrong. Interest rate sensitivity is minimal.

Liquidity function. Short-term instruments serve cash management and liquidity needs.

Medium-term

One to ten years. Medium-term notes and bonds balance yield and risk. Treasury notes in the 2-10 year range fall here.

Moderate duration. More interest rate sensitivity than short-term but less than long-term.

Long-term

Over ten years. Long-term bonds include 20-year and 30-year Treasuries, long corporate bonds, and some municipal bonds^[4].

Higher yields. Investors typically demand higher yields to compensate for longer commitment and greater interest rate risk.

Duration sensitivity. Long maturities mean high sensitivity to interest rate changes. Small rate moves cause large price changes.

Perpetual

No maturity. Some instruments have no fixed maturity date and continue indefinitely. British consols and certain preferred stocks have perpetual structures.

Callable features. Perpetual securities usually have call provisions allowing the issuer to redeem them.

Maturity and interest rate risk

Maturity drives interest rate sensitivity:

Duration relationship

Longer = more sensitive. The longer the maturity, the more sensitive the bond's price to interest rate changes. A 30-year bond moves much more than a 2-year note for the same rate change^[5].

Duration measure. Duration quantifies this sensitivity, expressing approximately how much a bond's price changes for a 1% change in rates.

Portfolio implications

Maturity matching. Investors match bond maturities to liability dates. A pension fund with obligations in 20 years buys 20-year bonds.

Laddering. Spreading investments across multiple maturities reduces reinvestment risk and provides regular liquidity.

Special cases

Not all instruments have straightforward maturities:

Callable bonds

Early redemption. Callable bonds give the issuer the right to redeem before maturity, typically if interest rates fall. The stated maturity may never be reached^[6].

Call protection. Most callable bonds have a period during which they cannot be called, giving investors some certainty.

Puttable bonds

Investor option. Puttable bonds let the investor force early redemption, typically if rates rise. The investor can demand principal return before stated maturity.

Amortizing securities

Gradual principal return. Mortgage-backed securities and some loans return principal gradually over time rather than all at maturity. The maturity date marks the final payment, but most principal has already been returned^[7].

Extension and prepayment risk

Variable effective maturity. For mortgage-backed and asset-backed securities, actual maturity depends on borrower prepayment behavior, which is uncertain.

Other applications

Maturity date applies beyond bonds:

Certificates of deposit. CDs mature on specified dates, returning principal plus accrued interest.

Term loans. Business loans have maturity dates when remaining principal must be repaid.

Options and futures. Derivatives have expiration dates analogous to maturity—the date when the contract terminates^[8].

Insurance policies. Endowment life insurance policies have maturity dates when the face amount is paid if the insured is still living.

Maturity date — recommended articles

Bond — Fixed income — Interest rate risk — Debt instrument

References

• Fabozzi F.J. (2013), Bond Markets, Analysis, and Strategies, 8th Edition, Pearson.
• Bodie Z., Kane A., Marcus A.J. (2014), Investments, 10th Edition, McGraw-Hill.
• Britannica Money (2023), Maturity Definition.
• AccountingTools (2023), Maturity Date Definition.

Footnotes

1. ↑ Fabozzi F.J. (2013), Bond Markets, p.12
2. ↑ Bodie Z. et al. (2014), Investments, pp.456-468
3. ↑ Britannica Money (2023), Maturity Definition
4. ↑ Fabozzi F.J. (2013), Bond Markets, pp.34-48
5. ↑ Bodie Z. et al. (2014), Investments, pp.478-492
6. ↑ AccountingTools (2023), Maturity Date
7. ↑ Fabozzi F.J. (2013), Bond Markets, pp.89-104
8. ↑ Bodie Z. et al. (2014), Investments, pp.512-524

Author: Sławomir Wawak