Definition of Escrowed To Maturity (ETM)

holding proceeds from a new bond issue in a separate escrow account to pay off an existing bond issue when it matures. Bond issuers will implement an advance refunding when interest rates have fallen significantly, making it advantageous to pay off the existing issue before scheduled maturity at the first call date.The funds raised by the refunding are invested in government securities in the escrow account until the principal is used to prepay the original bond issue at the first call date. The escrowed funds may also pay some of the interest on the original issue up until the bonds are redeemed.