Serial bond

A serial bond issue matures in installments. Instead of the entire principal coming due on a single date, the issuer schedules portions to mature each year — for example, a $50 million issue might retire $5 million of principal annually over ten years. Each maturity within the issue typically carries its own yield, with longer maturities usually offering higher yields.

Serial structures contrast with term bonds, where the full principal matures on one date (often supported by a sinking fund), and with balloon issues, which combine serial maturities with a large final payment. They also differ from series bonds, which are bonds issued in batches over time under one indenture — a distinction exams like to test because the names sound similar.

Issuers use serial maturities to match debt service to a predictable revenue stream. Municipalities are the classic example: a city repaying a general obligation issue from annual tax collections can retire a slice of principal every year rather than facing one massive payment. Spreading maturities also reduces refinancing risk and steadily lowers the issuer's outstanding interest cost.

For investors, serial bonds offer a menu of maturities within a single issue, making it easy to match a bond to a specific time horizon. The SIE and Series 7 exams both cover bond issuance structures — know how serial, term, and balloon maturities differ, and that quoted yields on serial bonds are stated as yield to maturity for each maturity date.