What is Maturity?
Maturity answers the essential question: when do I get my money back? Whether it's 3 months or 30 years, the maturity date sets the timeline for your investment and largely determines the bond's sensitivity to interest rate changes.
Maturity is the date when a bond's principal (face value) is repaid to the investor and the bond ceases to exist. It's one of the most fundamental characteristics of any debt security, determining how long the issuer borrows your money.
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Original vs. Remaining Maturity
Original maturity is the term at issuance (e.g., '10-year bond'). Remaining maturity (Restlaufzeit) is time left until repayment. A 10-year bond issued 3 years ago has 7 years remaining maturity. Markets care more about remaining maturity.
Maturity Categories
Short-term: up to 2 years (Bubills, Schatze). Medium-term: 2-10 years (Bobls, some Bunds). Long-term: over 10 years (Bunds). Ultra-long: 30+ years. Longer maturity generally means higher yield but more price volatility.
Maturity and Price Behavior
As bonds approach maturity, their prices converge toward face value (100). This 'pull to par' effect means a bond trading at 95 will gradually rise to 100 as maturity nears, regardless of interest rate movements — if the issuer doesn't default.
Maturity vs. Duration
| Aspect | Maturity | Duration |
|---|---|---|
| Definition | When principal is repaid | Weighted-average time to all cash flows |
| Considers coupons | No | Yes |
| Measures | Time | Interest rate sensitivity |
| Relationship | Fixed at issuance | Changes as yields and time change |
| For zero-coupon bonds | Equals duration | Equals maturity |
Practical Example: Maturity Ladder
You build a maturity ladder with €100,000: €25,000 each in 2-year Schatz, 5-year Bobl, 10-year Bund, and 30-year Bund. Every few years, one position matures and returns capital. This smooths out interest rate risk — when rates rise, you reinvest maturing bonds at higher yields.
Frequently Asked Questions
What is maturity in simple terms?
Maturity is when a bond 'matures' — the date the issuer pays back your principal. A 10-year bond matures 10 years after issuance; that's when you get your face value back.
Does longer maturity mean higher yield?
Usually yes — the yield curve typically slopes upward. Investors demand higher yields for locking up money longer. But during inversions, short-term bonds can yield more than long-term ones.
Can I sell before maturity?
Yes. Bonds trade on secondary markets daily. You can sell anytime at the current market price — which may be above or below what you paid, depending on interest rate movements.
What happens at maturity?
The issuer pays you the face value (typically €100 per unit). Any final coupon payment is also made. The bond then ceases to exist — it's no longer tradeable.
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