Maturity: Definition, How Maturity Dates Are Used, and Examples

As a final consideration, you'll owe taxes on your bonds when they mature, whether or not you redeem your bonds. Make sure to include any earned and previously unreported interest on your tax return in the year of maturity. If you don't, are campaign contributions tax deductible you might face a penalty for underpayment of taxes. As a result, the table reflects the U.S. long-term average inflation rate, which is 3.23%.

Is it safe to invest in bonds?

Similar to a bond, a CD is an investment product that pays interest on a lump sum of money over a specified period. Unlike bonds, though, CDs are backed by the Federal Deposit Insurance Corporation (FDIC). If a company goes bankrupt and defaults on its bonds, bondholders have a claim on that company's assets. But the type of bond, whether that's secured or unsecured, will determine the priority of a bondholder's claim. A company going through bankruptcy will also have other creditors. Ultimately, claims on the company's assets will be sifted through in bankruptcy court.

Once the bond reaches maturity, the bond owner will receive the face value (also referred to as "par value") of the bond from the issuer and interest payments will cease. As a bond grows closer to its maturity date, its yield to maturity (YTM), which is the anticipated return on the bond at maturity, and coupon rate begin to converge. Once the bond matures, the investor receives the full principal balance back and the investment is considered closed. With callable fixed income securities, the debt issuer can elect to pay back the principal early, which can prematurely halt interest payments made to investors. A bond's term to maturity is the length of time during which the owner will receive interest payments on the investment, when the bond reaches maturity and the principal is repaid. Coupon yield is the annual interest rate established when the bond is issued.

As a conservative measure, the calculation also assumes that the fixed-rate portion of I Bond interest will remain low or near zero. When you invest in a savings bond, you're loaning money to the federal government. The savings bond maturity date is when the government owes you the full amount of principal and interest on your loan. Suppose that a company issues 10-year bonds with a face value of $10,000 each and a coupon of 5% annually. In the two years following the bond issue, the company's earnings rise. This adds cash to its balance sheet and puts it in a stronger financial position.

When do savings bonds mature?

1. Series I savings bonds, commonly referred to as "I Bonds," fully mature after 30 years.
2. Medium or intermediate-term bonds generally are those that mature in four to 10 years, and long-term bonds are those with maturities greater than 10 years.
3. This date is included in a bond’s indenture at the time of issuance.
4. For Series EE bonds, you're guaranteed a fixed rate of interest throughout the life of the bond.
5. This amount is figured as a percentage of the bond’s par value and will not change during the lifespan of the bond.

At the maturity of a fixed-income investment such as a bond, the borrower is required to repay the full amount of the outstanding principal plus any applicable interest to the lender. Nonpayment at maturity may constitute default, which would negatively affect the issuer's credit rating. Bonds with longer terms to maturity tend to offer higher coupon rates (the annual amount of interest paid to the bondholder) than similar-quality bonds with shorter terms to maturity. You can hold your bond once it reaches maturity, but you won't earn any additional interest.

Example of a Bond's Yield

For Series EE bonds, you're guaranteed a fixed rate of interest throughout the life of the bond. The last batch will finally mature in August 2024 since the final HH bonds were issued in August 2004. You can get Treasury and savings bonds through a brokerage or directly from the U.S. government. You can buy corporate and municipal bonds through a brokerage or an investment or commercial bank. The company issued new bonds with six terms of maturity in short-term, medium-term, and long-term versions. The long-term version was a 30-year bond that pays 0.95% more than the comparable Treasury bonds.

But investors who purchased the bond after it had already risen in price might receive different yields to maturity (YTM). You usually receive some call protection for a period of the bond’s life – for example, the first three years after the bond is issued. This means that the bond cannot be called before a specified date.

This higher interest rate goes hand in hand with additional risks for investors. This article outlines what savings bond maturity means and what to do when your savings bond finally comes due. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.

All else equal, its bonds would rise in price, say, to $10,500; the yield would fall, because prices and yields move in opposite directions. Yield to maturity is a calculated estimate of the total amount of interest income that a bond will yield over its lifetime. You can add bonds to your investment portfolio to provide stability. When you invest in bonds, you're getting a steady stream of income in times when your stocks may perform poorly. Bonds are a great way to protect your savings when you don't want to put your assets at risk.

When a borrower doesn’t make payments on what is a note receivable their mortgage, the account goes into delinquency. This could result in foreclosure, and the borrower could lose their home. Typically, the longer the loan term, the smaller the monthly payments will be. If the holder of the CD does not cash it in at maturity, the financial institution may renew the CD at the same term, but the interest rate could change. The bond documents will include a lot of information, including the final maturity date.

They are ideal for investors who want to spread their risk, but don’t have enough money or time to rate and select different bonds to invest in. Bonds that don’t make regular interest payments are called zero-coupon bonds – zeros, for short. As the name suggests, these are bonds that pay no coupon or interest. Instead of getting an interest payment, you buy the bond at a discount from the face value of the bond, and you are paid the face amount when the bond matures. For example, you might pay $3,500 to purchase a 20-year zero-coupon bond with a face value of $10,000. Accrued interest is the interest that adds up (accrues) each day between coupon payments.

Current Maturity of Corporate Long-Term Debt

On one hand, you can't spend a savings bond without redeeming it, so the value of your bonds would be considered "safe" from that standpoint. On the other hand, you'll miss out on earning interest from other sources if your bond goes unredeemed. With inflation as high as it is now, it doesn't make much sense to hold a bond earning nothing and explicitly losing to inflation with each passing day.