Why in news?
Banks in Bangladesh, China, India, Mongolia, the Philippines, & Taiwan, hold sizable volumes of HTM securities.
About
- Businesses buy securities with the intent to hold them until maturity, and these securities are known as Held-to-Maturity (HTM) securities.
- Trading securities or securities open for sale differ from Held-to-Maturity (HTM) securities as businesses do not hold them until maturity.
- The most popular HTM investment types are bonds and other debt instruments.
- HTM securities do not include stocks as they lack a maturity date.
Advantages
- Holding securities until maturity has very little risk.
- If the bond issuer does not default, the returns are guaranteed.
- They are lower-Beta assets, allowing investors to diversify their Portfolio risks.
Disadvantages
- Held-to-maturity securities impact the company’s liquidity.
- Companies cannot rely on these assets to be sold if they need cash in the short term.
- The company’s returns won’t increase if financial markets rise overall.
Read also:- China Taiwan Conflict
Conclusion
Held-to-Maturity (HTM) securities serve as important investment instruments in the financial markets. These securities offer stability, predictable cash flows, and reduced volatility for investors. By committing to hold these securities until maturity, investors can accurately measure their value on the balance sheet and benefit from consistent income through interest or coupon payments.
The classification of securities as HTM provides protection against short-term market fluctuations and interest rate changes because they are reported at amortized cost rather than fair value.
This accounting treatment mitigates the impact of market volatility on financial statements by helping to reduce the influence of market fluctuations.
Read also:- Production of Pineapple
Held-To-Maturity (HTM) Securities,Held-To-Maturity (HTM) Securities
