Maturity refers to the expiry date of a debt instrument when bonds are refunded at par. The maturity date allows investors to plan their reinvestment decisions and schedule of coupon payments. Often investors will roll over maturing securities into new, longer dated instruments. When trading on the fixed income market, maturity dates are some of the most important information to confirm before buying bonds.
When a bond matures, investors are reimbursed the par value of the bond, and coupon payments cease. After this date the bond no longer exists, so investors who want to maintain their coupon payments and credit exposure will need to buy a new, longer-dated instrument.
When a bond is trading at discount, or in excess of par, the overall yield is influenced by the difference from par. As a creditworthy bond approaches maturity, the price will converge on par (100), and a close to maturity bond trading at a discount is danger signal for the ability to repay.
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