Sell your bonds or hold to maturity? Questions to consider before deciding

Bond yields have risen in 2026 and those higher yields may have pushed down the value of bonds you already own. If that's the case, you may be wondering whether to sell your bonds or wait for them to mature. The answer depends on more than where yields may go next.

Before selling an individual bond, consider why you bought it, when you'll need the money, whether the issuer's financial condition has changed and what you would do with the money. A lower market price doesn't necessarily mean selling is the right move, particularly if the bond is still playing a key role in your portfolio.

Holding vs. selling a bond: When does either make sense?

Holding to maturity means keeping a bond until its due date. Along the way, you typically collect coupon (interest) payments, and at maturity you receive the bond's par value (face value), assuming the issuer doesn't default. Holding to maturity may make sense when the bond still serves its purpose, you won't need the money before maturity and the issuer's credit is sound.

Selling early is a different story. If rates have risen since you bought the bond, you may have to sell it below par. If rates have fallen since you bought it, you may end up selling above par. Some reasons investors may sell their bonds before maturity can include:

Consider asking yourself this first: Why did you buy this bond in the first place? If you bought it to generate predictable income or fund an expense at a particular future date, a drop in its current market value may not change that plan. Beyond that, the main drivers in your decision to hold or sell might be time horizon, credit risk, opportunity cost, taxes, liquidity and portfolio fit.

Bond math in plain English: Price, yield and what ‘unrealized loss’ really means

A bond price is what you pay for the bond. A bond yield is what you can earn for owning the bond. Bond prices and yields move in opposite directions. When yields rise, existing bond prices tend to fall; likewise, when yields fall, bond prices tend to rise. A bond's coupon yield or coupon rate is the stated interest rate that does not change. Coupon is different from yield in that the yield may change as bond prices change.

Here's a simple example: You own a bond with a 3% coupon, but new bonds with similar terms and credit quality now offer a 5% yield. Your bond becomes less attractive to buyers, so its market price generally falls. If instead new bonds offered yields below 3%, your bond's higher coupon would be more attractive, and its market price may rise.

If your bond's market price falls below what you paid for it, that decline generally shows up on your statement as an unrealized loss. Selling would turn that unrealized loss into a realized one. That's why statements can look negative even when your scheduled coupon payments and the bond's par value haven't changed.

Still, holding the bond to maturity isn't risk-free. There's opportunity cost because you could miss out on higher yields available elsewhere, although selling at a loss to reinvest doesn't automatically leave you better off. There's inflation risk, since fixed payments buy less over time. And there's credit risk, since par is returned only if the issuer can pay.

Bond funds and exchange-traded funds (ETFs) work differently because they hold many bonds with varying maturities. Unlike an individual bond, they don't have a single maturity date when you can expect your principal back, and their value can continue to fluctuate with market conditions.

Questions to consider before you sell (or decide to hold) your bonds

It’s important to evaluate how any potential bond sales could impact your overall portfolio. Asking yourself the following questions may help you clarify your strategy.

When will you need the money?

If you need the money before the bond matures, its current market value matters. Selling during a period of higher rates could mean accepting less than par. If you don't need the money soon, holding to maturity may reduce the pressure to sell during an unfavorable market.

Has the issuer's credit changed?

Don't focus only on yields. Higher yields can sometimes reflect increased credit risk, meaning investors are demanding a better return for taking on a greater chance of default. Look for credit-rating downgrades, weakening finances or other signs that the issuer may have more difficulty meeting its obligations before deciding to hold or sell.

How sensitive is your bond to rate moves?

Longer maturities generally mean greater sensitivity to interest rate changes. Duration measures that sensitivity, with higher-duration bonds typically experiencing larger price swings when rates change. That works both ways: Bond prices may fall more when rates rise, and they may rise when rates fall.

What's your next move after selling?

Selling your bond may make sense if you can move your money into an investment that better fits your goals. Compare your next move with what you're giving up by selling your bond.

What are the costs to sell?

Bonds may not trade as easily or transparently as stocks. Depending on the bond, selling may involve bid-ask spreads, commissions, or broker markups or markdowns. Less-liquid corporate and municipal bonds may carry higher trading costs.

What are the tax implications?

Selling a bond for more or less than your adjusted cost basis may come with capital gains or losses, and you may have to pay taxes. The wash sale rule may also apply if you sell at a loss and purchase substantially identical bonds within 30 days before or after the sale. Because bond taxation varies by security, account and transaction, consider consulting a tax professional before selling.

Considerations for bond investors

While you’ll want to weigh the implications before selling any bonds, it may be worthwhile to make strategic changes to your fixed-income portfolio in some situations. Consider moves like these below if they're right for your situation:

The bottom line

A falling bond price doesn't automatically mean it's time to sell, just as holding to maturity isn't always the best choice. Start with why you own the bond, when you'll need the money, and whether its credit quality and cash flows still fit your plan. If the bond still fits your goals, holding may make sense. If your needs, risk tolerance or investment opportunities have changed, selling or adjusting your bond strategy may be worth considering.

View Disclosures