Maturity Date

Maturity Date

A bond maturity date refers to the date at which the principal amount of the bond is payable to the bond holder. On the maturity date of the bond, the agreement between the bond holder and the issuer of the bond ceases. For example, a bond that is due to expire on November 21, 2008 will mandate that the issuer of the bond return the principal back to the bond holder as well as all remaining interest payments on that date.

If the indenture allows, there may be a call provision which will allow the bond issuer to buy the bond back from the bond holder before maturity. This is something to look for explicitly. If this option is allowable, the bond yield will adjust higher to compensate the bond holder for that risk.

Tim Ord
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