fixedmaturity

Fixed maturity is a term used in finance to describe securities or investment products that have a specified maturity date, at which the principal invested is repaid to the investor. Such instruments are issued with a defined horizon and often pay periodic interest (coupons) until repayment.

Common examples include government and corporate bonds, certificates of deposit, and fixed maturity plans offered by mutual funds or banks. In some markets, fixed maturity plans (FMPs) are a category of close-ended funds that lock in capital for a predetermined period, such as one to five years.

Key characteristics include a predetermined maturity date, a fixed schedule of cash flows, and exposure to credit risk of the issuer as well as interest-rate risk. Liquidity varies: some fixed maturity products trade on an exchange or in over-the-counter markets, while others are designed to be held to maturity until the principal is repaid. Price sensitivity generally increases with longer maturities.

Investors use fixed-maturity instruments for liability matching, predictable income, and capital preservation relative to longer, open-ended positions. However, they still face reinvestment risk for interim cash flows, credit risk, inflation risk, and potential liquidity constraints if early redemption is not available.

Tax treatment and regulation differ by jurisdiction. In many places, returns come as periodic interest and are taxed accordingly; the principal repayment at maturity is generally not taxed as a separate event, though tax rules vary.