Bond “laddering” means investing in bonds with staggered maturity dates rather than all maturing at once. With $500,000 to invest, you might invest $100,000 in five different bond issues each maturing in years 1 through 5. As each bond matures, you reinvest it at the top of the ladder. The benefits are steady liquidity (something always comes due within one year), reduced interest rate risk (you reinvest across different rate environments rather than locking in all at one moment), and predictable cash flow.
For retainage substitution, this fits naturally because public contracts have defined milestones and completion dates. You can structure the bonds to mature around known retainage release points, so a bond comes due right when the underlying obligation resolves. Across a book of projects with staggered completion dates, the ladder's maturity schedule can track the aggregate release calendar, while the substituted capital, previously frozen, earns a return. Because these assets stand in as security for the project owner, the ladder should lean toward high grade investments, prioritizing principal preservation over yield (focus on high quality because safety of principal is first and foremost).
Double Diamond has spent over 30 years helping public sector contractors make money from retainage, and time their retainage correctly for their projects. Call us at 877 420 2852, or click here to learn more.
