Maturity Date

What Is a Maturity Date?

A maturity date is the day a debt obligation comes due, when the borrower must repay the amount originally borrowed, called the principal. It is set when the debt is issued and written into the contract, so both parties know in advance when repayment is expected. Maturity dates appear on many debt instruments, including loans, certificates of deposit, and bond issues.

How It Works

Until the maturity date, the borrower usually pays interest at regular intervals. For a bond, these payments are called the coupon. On the maturity date, the issuer pays back the principal along with the final interest payment, and the obligation ends. Some debt is repaid in installments over time, so it has a series of partial repayment dates instead of one final date. Certain bonds also include early-redemption features, which allow the issuer to repay before the stated date.

Maturity dates are often grouped by how far away they are. Short-term instruments generally mature within a year, while long-term bonds can run for decades. The time remaining until maturity is a key factor in how a security behaves in the market.

Why It Matters to Investors

The maturity date tells an investor how long their money will be committed and when they can expect to get the principal back. Longer maturities generally expose holders to more interest rate risk, because a bond's market price tends to move more when rates change the longer it has left to run. Investors also use the maturity date to calculate yield to maturity, an estimate of the total annual return if the security is held until it matures and all payments are made as scheduled.

An Example

Suppose a bond is issued with a maturity date ten years away. An investor who buys it receives interest payments until that date. On the maturity date, the issuer repays the face value. If the investor sells the bond before then, the sale price depends on current market conditions, not on the maturity date alone.