Maturity

Maturity is the date on which the principal (face value) of a bond, debenture, or other fixed-income instrument becomes due and is repaid to the investor. The period from issuance to maturity is called the tenor or tenure of the instrument.

Fixed-income instruments in India span a wide range of maturities. Treasury Bills (T-Bills) have maturities of 91, 182, or 364 days. Government Securities (G-Secs) range from 1 year to 40 years. Corporate bonds typically have 1–10 year tenors. Fixed deposits at banks offer maturities from 7 days to 10 years. The choice of maturity depends on the investor's time horizon, Interest Rate outlook, and liquidity needs.

Maturity is directly linked to interest rate risk through the concept of duration. Longer-maturity bonds have higher duration, meaning their prices are more sensitive to interest rate changes. A 10-year G-Sec might fall 7–8% in price if interest rates rise by 1%, while a 2-year bond might fall only 1.5–2%. This is why investors expecting rate hikes shift to shorter maturities, and those expecting rate cuts move to longer maturities.

In the Indian government bond market, the benchmark 10-year G-Sec yield is the most closely watched indicator of the overall interest rate environment. As of recent periods, this yield has ranged between 6.5% and 7.5%. RBI conducts auctions for G-Secs and T-Bills regularly, and these are accessible to retail investors through the RBI Retail Direct platform launched in November 2021.

For debt Mutual Fund investors, the average maturity of the fund's portfolio determines its interest rate sensitivity. SEBI categorises debt funds partly by maturity profile: liquid funds (up to 91 days), ultra-short duration (3–6 months), short duration (1–3 years), medium duration (3–4 years), and long duration (7+ years). Matching the fund's average maturity to your investment horizon reduces the risk of adverse price movements.