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Check your understanding
What does maturity tell you?
Tenor, Sight and Maturity
Simple concepts first. Proper banking terminology second.
Tenor
Tenor is the period of time before a payment obligation becomes due. Examples include sight, 30 days, 60 days or 180 days after an agreed event.
Sight
Sight usually means payment is due when the relevant complying presentation is made and the bank has completed the applicable examination process, rather than after a future 60- or 90-day tenor.
Usance / deferred payment
A usance or deferred structure means payment occurs later. The exact maturity calculation depends on the wording, such as days after sight, shipment date, bill of lading date or another stated event.
Maturity
Maturity is the date when the deferred obligation becomes payable. A correctly calculated maturity date matters for settlement and financing.
Why time affects financeability
A financier taking a 180-day exposure is taking different credit, funding and country risks from someone expecting sight payment. Tenor therefore affects pricing and appetite.
Remember thisAmount tells you “how much.” Tenor and maturity tell you “when.”
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