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Updated 2mo ago.
Updated 2mo ago.
Maturity is the date on which the bond issuer must repay the borrowed principal to the investor. It can range from a few months to over 30 years. The longer the maturity, the more sensitive the bond is to interest rate changes.
Canadian bonds are classified by maturity: short-term (1-5 years), medium-term (5-10 years), and long-term (10-30 years). Each category has dedicated ETFs:
In 2022, when the Bank of Canada raised rates rapidly, ZFL.TO (long-term) lost about 22%, while ZSB.TO (short-term) lost only about 4%. This is the direct effect of maturity on risk.
Maturity determines the level of interest rate risk in your bonds. A beginner seeking stable fixed income should favour short to medium maturities. Longer maturities offer better yields but come with much larger price swings.