Debt contracts specify when principal comes due. A 91 day treasury bill matures in about three months; a ten year bond matures a decade after issue. At maturity the issuer repays face value (and any final coupon, depending on the instrument). Selling before maturity means you take market price risk. Matching maturity to when you need cash is a basic planning tool for both households and treasurers.
Key takeaways
- Maturity ends the scheduled life of the debt instrument.
- Longer maturities usually bring more interest rate price sensitivity for bonds.
- Rolling short term debt creates refinancing risk at each renewal.
- Check call features: some bonds can be repaid before final maturity.