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Maturity

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Definition of Maturity

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Maturity

For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the
date that the swap stops accruing interest.


Maturity

The date or the number of days until a security is due to be paid or
a loan is to be repaid


Maturity

The time when a policy or annuity reaches the end of its span.


Maturity

Time at which a bond can be redeemed for its face value.



Related Terms:

Average maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates
have greater impact on funds with longer average life.


Balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a a sinking
fund requirement.



Current maturity

Current time to maturity on an outstanding debt instrument.
Current / noncurrent method
Under this currency translation method, all of a foreign subsidiary's current
assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets
and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was
acquired or the liability incurred.


Held-to-Maturity Security

A debt security for which the investing entity has both the positive
intent and the ability to hold until maturity.


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Maturity date

The date when the issuer returns the final face value of a bond
to the buyer.


Maturity Date

Date on which a debt is due for payment.


Maturity factoring

Factoring arrangement that provides collection and insurance of accounts receivable.


Maturity phase

A phase of company development in which earnings continue to grow at the rate of the
general economy. Related: Three-phase DDM.


maturity premium

Extra average return from investing in longversus short-term Treasury securities.


Maturity spread

The spread between any two maturity sectors of the bond market.


Maturity value

Related: par value.


Original maturity

maturity at issue. For example, a five year note has an original maturity of 5 years; one
year later it has a maturity of 4 years.


Projected maturity date

With CMOs, final payment at the end of the estimated cash flow window.


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Remaining maturity

The length of time remaining until a bond's maturity.


Return-to-maturity expectations

A variant of pure expectations theory which suggests that the return that an
investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding
a zero-coupon bond with a maturity that is the same as that investment horizon.



Stated maturity

For the CMO tranche, the date the last payment would occur at zero CPR.


Term to maturity

The time remaining on a bond's life, or the date on which the debt will cease to exist and
the borrower will have completely paid off the amount borrowed. See: maturity.


Term to Maturity

Period of time from the present to the redemption date of a bond.


Time to maturity

The time remaining until a financial contract expires. Also called time until expiration.


Weighted average maturity

The WAM of a MBS is the weighted average of the remaining terms to maturity
of the mortgages underlying the collateral pool at the date of issue, using as the weighting factor the balance
of each of the mortgages as of the issue date.


Weighted average remaining maturity

The average remaining term of the mortgages underlying a MBS.


Yield to maturity

The percentage rate of return paid on a bond, note or other fixed income security if you
buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to
maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at
the same rate.


Yield to Maturity

The measure of the average rate of return that will be earned on a
debt security held until it matures


Yield to maturity

A measure of the average rate of return that will be earned
on a bond if held to maturity.


yield to maturity

Interest rate for which the present value of the bond’s payments equals the price.



Accretion (of a discount)

In portfolio accounting, a straight-line accumulation of capital gains on discount
bond in anticipation of receipt of par at maturity.


Accrual bond

A bond on which interest accrues, but is not paid to the investor during the time of accrual.
The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.


Accrued Income

Income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.


Amortization

The reduction of debt by regular payments of interest and principal sufficient to pay off a loan by maturity.


Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.


Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.


Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed upon maturity.


Back-up

1) When bond yields and prices fall, the market is said to back-up.
2) When an investor swaps out of one security into another of shorter current maturity he is said to back up.


Basis price

Price expressed in terms of yield to maturity or annual rate of return.


Benchmark interest rate

Also called the base interest rate, it is the minimum interest rate investors will
demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a
comparable-maturity Treasury security that was most recently issued ("on-the-run").


Benchmark issues

Also called on-the-run or current coupon issues or bellwether issues. In the secondary
market, it's the most recently auctioned Treasury issues for each maturity.


Bond

A long-term debt instrument in which the issuer (borrower) is
obligated to pay the investor (lender) a specified amount of
money, usually at specific intervals, and to repay the principal
amount of the loan at maturity. The periodic payments are based
on the rate of interest agreed upon at the time the instrument is
sold.


Bond

A financial asset taking the form of a promise by a borrower to repay a specified amount (the bond's face value) on a maturity date and to make fixed periodic interest payments.


Bond

Fixed interest security issued by a corporation or government, having a specific maturity date.


Bond-equivalent yield

The annualized yield to maturity computed by doubling the semiannual yield.


Bootstrapping

A process of creating a theoretical spot rate curve , using one yield projection as the basis for
the yield of the next maturity.


Call

a. An option to buy a certain quantity of a stock or commodity for a
specified price within a specified time. See Put.
b. A demand to submit bonds to the issuer for redemption before the maturity date.
c. A demand for payment of a debt.
d. A demand for payment due on stock bought on margin.


Call date

A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
for a specified call price.


Call option

An option contract that gives its holder the right (but not the obligation) to purchase a specified
number of shares of the underlying stock at the given strike price, on or before the expiration date of the
contract.
Call premium
Premium in price above the par value of a bond or share of preferred stock that must be paid to
holders to redeem the bond or share of preferred stock before its scheduled maturity date.


Call Option

A contract that gives the holder the right to buy an asset for a
specified price on or before a given expiration (maturity) date


Call price

The price for which a bond can be repaid before maturity under a call provision.


Call provision

An embedded option granting a bond issuer the right to buy back all or part of the issue prior
to maturity.


callable bond

Bond that may be repurchased by the issuer before maturity at specified call price.


Capital Market

The market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded.


Cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization in
which the manager matches the maturity of each element in the liability stream, working backward from the
last liability to assure all required cash flows.


Cash management bill

Very short maturity bills that the Treasury occasionally sells because its cash
balances are down and it needs money for a few days.


Certificate of deposit (CD)

Also called a time deposit, this is a certificate issued by a bank or thrift that
indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest
rate, and can be issued in any denomination. The duration can be up to five years.


Commercial paper

Short-term unsecured promissory notes issued by a corporation. The maturity of
commercial paper is typically less than 270 days; the most common maturity range is 30 to 50 days or less.


Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.


Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.


Current Yield

The percentage return on a financial asset based on the current price of the asset, without reference to any expected change in the price of the asset. This contrasts with yield-to-maturity, for which the calculation includes expected price changes. See also yield.


Discount curve

The curve of discount rates vs. maturity dates for bonds.


Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.


Discounted basis

Selling something on a discounted basis is selling below what its value will be at maturity,
so that the difference makes up all or part of the interest.


Documented discount notes

Commercial paper backed by normal bank lines plus a letter of credit from a
bank stating that it will pay off the paper at maturity if the borrower does not. Such paper is also referred to as
LOC (letter of credit) paper.


Duration

The weighted average of the time until maturity of each of the
expected cash flows of a debt security


Duration

The expected life of a fixed-income security considering its coupon
yield, interest payments, maturity, and call features. As market interest rates
rise, the duration of a financial instrument decreases. See Macaulay duration.


Duration

The time it takes for a policy or annuity to reach maturity.


Endowment

Life insurance payable to the policyholder, if living on the maturity date stated in the policy, or to a beneficiary if the insured dies before that date. For example, some Term to age 100 policies offer the option of taking the face amount of the policy as a cash payout at age 100 if the policyholder is still alive and paying all required income taxes on the amount received or leaving the policy to pay out upon death whereupon the payout is tax free.


Evergreen credit

Revolving credit without maturity.


Extendable bond

Bond whose maturity can be extended at the option of the lender or issuer.


Extendable notes

Note the maturity of which can be extended by mutual agreement of the issuer and
investors.


Extension swap

Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly
longer current maturity.


Face value

The maturity value of a security. Also known as par value,
principal value, or redemption value.


face value

Payment at the maturity of the bond. Also called par value or maturity value.


Face Value

The payoff value of a bond upon maturity. Also called par value. See principal.


Face Value

The nominal value which appears on the face of a document recording an entitlement, generally an amount of money that has to be repaid on the maturity of a debt instrument.


Floating-rate contract

A guaranteed investment contract where the credit rating is tied to some variable
("floating") interest rate benchmark, such as a specific-maturity Treasury yield.


Floor

Interest-rate option that guarantees that the rate on a floating-rate
loan will not fall below a certain level.
Forward curve
The curve of forward interest rates vs. maturity dates for bonds.


Forward forward contract

In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
at a fixed price for future delivery.


Forward rate

The future interest rate of a bond inferred from the term
structure, especially from the yield curve of zero-coupon bonds, calculated from
the growth factor of an investment in a zero held until maturity.


funded debt

Debt with more than 1 year remaining to maturity.


GNMA Midget

A GNMA pass-through certificate backed by fixed rate mortgages with a 15 year maturity.
GNMA Midget is a dealer term and is not used by GNMA in the formal description of its programs.


Guaranteed investment contract (GIC)

A pure investment product in which a life company agrees, for a
single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of
the investment, all of which is paid at the maturity date.


Implied volatility

The expected volatility in a stock's return derived from its option price, maturity date,
exercise price, and riskless rate of return, using an option-pricing model such as Black/Scholes.


Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.


Internal rate of return

a. The average annual yield earned by an investment during the period held.
b. The effective rate of interest on a loan.
c. The discount rate in discounted cash flow analysis.
d. The rate that adjusts the value of future cash receipts earned by an investment so that interest earned equals the original cost.
See Yield to maturity.


Intramarket sector spread

The spread between two issues of the same maturity within a market sector. For
instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility
corporate bonds.


Ladder strategy

A bond portfolio strategy in which the portfolio is constructed to have approximately equal
amounts invested in every maturity within a given range.


Long bonds

Bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.


Long bonds

Bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.


Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.


Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period.


Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.


Macaulay duration

The weighted-average term to maturity of the cash flows from the bond, where the
weights are the present value of the cash flow divided by the price.


Macaulay duration

A widely used measure of price sensitivity to yield
changes developed by Frederick Macaulay in 1938. It is measured in years and
is a weighted average-time-to-maturity of an instrument. The Macaulay
duration of an income stream, such as a coupon bond, measures how long, on
average, the owner waits before receiving a payment. It is the weighted
average of the times payments are made, with the weights at time T equal to
the present value of the money received at time T.


Market segmentation theory or preferred habitat theory

A biased expectations theory that asserts that the
shape of the yield curve is determined by the supply of and demand for securities within each maturity sector.


Match fund

A bank is said to match fund a loan or other asset when it does so by buying (taking) a deposit of
the same maturity. The term is commonly used in the Euromarket.


Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.


Money Market

A financial market in which short-term (maturity of less than a year) debt instruments such as bonds are traded.


Negotiated certificate of deposit

A large-denomination CD, generally $1MM or more, that can be sold but
cannot be cashed in before maturity.



 

 

 

 

 

 

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