ExpertGlossary

Matrix trading occurs when the yield spread between two categories of bonds with different levels of risk is temporarily inconsistent with what that spread would normally be, prompting traders to try to capitalize on an unusual situation by initiating a bond swap.

For example, such a swap might involve long-term corporate bonds with high ratings and those with low ratings or bonds with longer terms and those with shorter terms.

A bond or other loan that must be repaid comes due on its maturity date. On that date, the full face value of the bond (and sometimes the final interest payment) must be paid in full to the bondholder.

Certificates of deposit (CDs) also have maturity dates on which you may withdraw the principal and interest without penalty or roll over the money into a new CD.

Other debt instruments, such as mortgage-backed securities, pay back their principal over the life of the debt, similar to the way a mortgage is amortized, or paid down. While these instruments also have a maturity date, that date is when the last installment payment of the loan as well as the last interest payment is due.