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Updated August 5, 2020

What are Held-to-Maturity Securities?

Held-to-maturity securities refer to debt securities which an investor holds until maturity.

How Do Held-to-Maturity Securities Work?

When investors purchase debt securities such as bonds, they have two choices: to hold the security until maturity or to sell it at a premium following a relative decline in interest rates. A debt security is described as held-to-maturity if the holder chooses to hold it for the entirety of its term. For instance, if the holder of a 10-Year Treasury bond chooses to hold it until the maturity date in the tenth year, the Treasury bond qualifies as held-to-maturity.

Why Do Held-to-Maturity Securities Matter?

As fixed-income items, held-to-maturity securities are not susceptible to market price fluctuations as returns are locked-in at the time of purchase. In other words, though the market value of the security held may fluctuate, the returns will not since the holder intends to hold the bond until maturity, benefiting from the interest returns.

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