Maturity is the exact date when a loan, bond, or other debt must be fully repaid to the lender. For standard bonds, the borrower pays back the original face value on this final day. Reaching this date ends the debt contract entirely, meaning any new borrowing happens under new interest rates.
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Maturity is the date when a debt reaches the end of its term. A mortgage, a Treasury bill, and a bond can all have a maturity date. For a conventional bond, the issuer pays the face value at maturity. That amount may differ from what an investor paid or what the issuer received when the bond was sold.
A loan can repay principal in pieces along the way. Its maturity date is when the scheduled repayment period ends and any remaining amount comes due.
Treasury bills mature in a year or less. Treasury notes run from two to ten years, and Treasury bonds can run for twenty or thirty years. A borrower using short-term debt must repay it or borrow again sooner.
Long-term debt does not come due for years. Investors may demand a different interest rate for lending their money for that long.
When a Treasury security matures, Treasury pays its holder. Treasury may sell new Treasury securities to raise that cash. This is called rolling over or refinancing the debt. The new security has its own maturity date and interest rate. Refinancing replaces the old debt; it does not preserve the old terms.
When short-term yields are below long-term yields, short debt may cost less at first. But it must be refinanced sooner, and the new rate could be higher.
A maturity date marks the end of a debt instrument's term. On this redemption date, the borrower pays back the principal amount along with any remaining interest. Mortgages, term deposits, and fixed or variable rate loans all rely on these scheduled end dates.
For a conventional bond, the issuer returns the stated face value at maturity. This payout can differ from the initial purchase price that the investor paid. Loans may instead pay off pieces of the principal over time, leaving only the final balance due on the maturity date.
Debt terms range from days to decades. Treasury bills mature in a year or less, Treasury notes run from two to ten years, and Treasury bonds extend to twenty or thirty years. Investors often demand different interest rates depending on how many years their money will remain locked up.
Not all debt has a single, fixed end date. Serial maturities divide a single bond offering into separate classes that mature on staggered dates. Other instruments offer a window of possible redemption dates for the borrower to choose from, while perpetual stocks have no fixed maturity date and can continue indefinitely.
When an obligation matures, the borrower must deliver cash to the holder. Governments and companies often raise this cash by selling new securities, a process called rolling over or refinancing the debt.
Rolling over debt replaces old agreements rather than extending them. If a borrower relies on short-term debt, they must refinance frequently. A lower initial interest rate on short-term debt saves money at first, but each maturity date exposes the borrower to higher market interest rates on the new issue.
What does a debt's maturity date tell you?
When its term ends and any remaining principal is due. Maturity is the end of the debt's term, when any principal still outstanding comes due. Some loans repay principal along the way.
What risk comes with using shorter-term debt?
The borrower must refinance or repay sooner. A shorter maturity brings the due date closer. If the borrower needs the money for longer, it must refinance at whatever rate the market offers then.
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Securities without a fixed maturity date, such as perpetual stocks, continue indefinitely. They remain active until the borrower and lender reach an agreement to repay the principal.
A serial maturity occurs when a group of bonds is issued at the same time but split into distinct classes. Each class is assigned a different redemption date, staggering the repayments across multiple years.
Market reports often use maturity as shorthand for the security itself. A phrase like ten-year maturities refers to all bonds scheduled to reach their final payout date ten years from now.
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The national debt is not one giant bill. It is a schedule of IOUs, with old ones coming due while Treasury sells new ones.
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