Glossary
Maturity
The date on which a bond's principal is due to be repaid and interest payments stop.
Maturity is the date when a bond or other debt comes due: the issuer repays the principal (the face value) and the interest payments end. The word also describes the time remaining until that date, as in "a bond with seven years to maturity." Maturity is one of the main things that sets how a bond behaves: how much it yields, how much its price moves when interest rates change, and when your money comes back.
How maturity shapes a bond
Bonds are often grouped by maturity. US Treasury bills mature in a year or less, Treasury notes are issued with terms of two to ten years, and Treasury bonds with terms of 20 or 30 years. Corporate and municipal debt spans a similar range, and a few issuers have sold bonds lasting 50 or 100 years.
As a bond nears maturity its price is pulled toward face value, because the remaining payments are fewer and closer. That is why a two-year note moves far less than a 30-year bond for the same change in interest rates.
What to watch for
Some bonds can end before their stated maturity. A callable bond lets the issuer repay early, usually when rates have fallen, and a putable bond lets the holder demand early repayment. Sinking funds retire part of an issue each year. Investors often compare yield to maturity with yield to call to see the worst case. Matching maturities to when you need the money is the basis of a bond ladder.