Recognizing the Sale (at) HTM Securities Before MaturityHTM•Securities are intended for holders until maturity, providing a predictable return on investment. But then it comes as to Is the sale of HTM securities Before Maturity allowed?
Type of HTM Securities: The best examples are bonds or any other debt instruments that an investor buys with the primary idea is to keep them until maturity. Such a classification gives comfort as safety and predictability is on account of principal becoming due at maturity with fixed interest pay out16.
Flexibility to Sell: Although the HTM securities are not earmarked for early sale, it is legally feasible. But saying so can have momentous consequences. It may be contrary to accounting principles, even taint the entire HTM portfolio for future transactions when an investor sells a security that he has classified as HTMat issue date before maturity. Such sales could, therefore, have regulatory ramifications or impact the financial statements of the entity disposing of such assets later.HTM Securities (ad)
Market Conditions: Due to market conditions or the need for liquidity, one may decide to sell HTM securities. Selling the HTM security if interest rates increased significantly after purchasing would cause it to be sold at a lower value than purchased4. On the other side, when interest rates trend down, there may be potential to sell at a premium but this would still be antithetical with up front intent to hold till maturity14.
So all in all, even if HTM securities are to be held until maturity due to their stable and lower risk profile for predictable returns, investors can resort to sale. That said, before selling a significant stake in the business it would be wise to consider certain accounting and sale price market conditions.
