Markets
Maturity is the remaining time until a bond is repaid; duration additionally measures the average period of capital commitment and interest-rate sensitivity.
The maturity of a bond is the remaining time until the face value is repaid. Duration (modified duration) measures the average period of capital commitment, taking all cash flows into account.
Duration is an important risk measure: the longer the duration, the more strongly the bond price reacts to interest-rate changes. A duration of 5 means that a 1 % rise in rates causes the price to fall by roughly 5 %.
In low-interest-rate environments, short-duration bonds are generally safer. In high-interest-rate environments, long-duration bonds can deliver attractive capital gains when rates are expected to fall.
Related terms
See taxes, dividends and allocation for your whole portfolio in one place.