Perpetual bond, which is also known as a Perpetual or just a Perp, is a bond with no maturity date. Therefore, it may be treated as equity, not as debt. Issuers pay coupons on Perpetual bonds forever, and they do not have to redeem the principal. Perpetual bond cash flows are, therefore, those of a perpetuity.
Examples of perpetual bonds are consols issued by the UK Government. Most perpetual bonds issued nowadays are deeply subordinated bonds issued by banks. The bonds are counted as Tier 1 capital, and help the banks fulfil their capital requirements. Most of these bonds are callable, but the first call date is never less than five years from the date of issue—a call protection period.
Read more about Perpetual Bond: Pricing
Famous quotes containing the words perpetual and/or bond:
“I were better to be eaten to death with a rust than to be scoured to nothing with perpetual motion.”
—William Shakespeare (1564–1616)
“Man’s characteristic privilege is that the bond he accepts is not physical but moral; that is, social. He is governed not by a material environment brutally imposed on him, but by a conscience superior to his own, the superiority of which he feels. Because the greater, better part of his existence transcends the body, he escapes the body’s yoke, but is subject to that of society.”
—Emile Durkheim (1858–1917)