You may have come across the phrase “Hold to maturity” or as a term ‘HTM” when you are reading investing information regarding bonds, loans, debentures, treasury bills etc.
Hold To Maturity basically refers to the decision of an owner to hold his investments in an asset/security till it matures and is due for repayment. Assuming you buy a security like a Bond worth N10million that has a tenor/maturity of 20years. The bond pays you interest of N1m every year (10%pa) for the next 20years. You have two options regarding this bond.
- You can sell the bond anytime within the 20 yrs to a buyer who is willing to pay at a market determined price. The value of the bond at the time you sold can be higher than the N10million face value or lower depending on market price. Whatever, the case you go home with all the interest you have received all the years you held the bond as an asset as well as the capital you were paid back.
- The other way is to keep the bond for the entire duration of the 20years. Therefore all you get is interest payments throughout the 20 years and the face value N10million at the end of 20 years. This is what is called Holding to Maturity.
Unlike in 1 above, 2 is an option to hold the security or asset to maturity. Maturity is basically when the bond is now due to be raid by the bond issuer.