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:
“There is no such thing as perpetual tranquillity of mind while we live here; because life itself is but motion, and can never be without desire, nor without fear, no more than without sense.”
—Thomas Hobbes (1588–1679)
“The bond between a man and his profession is similar to that which ties him to his country; it is just as complex, often ambivalent, and in general it is understood completely only when it is broken: by exile or emigration in the case of one’s country, by retirement in the case of a trade or profession.”
—Primo Levi (1919–1987)