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:
“Sickness disgusts us with death, and we wish to get well, which is a way of wishing to live. But weakness and suffering, with manifold bodily woes, soon discourage the invalid from trying to regain ground: he tires of those respites which are but snares, of that faltering strength, those ardors cut short, and that perpetual lying in wait for the next attack.”
—Marguerite Yourcenar (1903–1987)
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—Bible: New Testament, Ephesians 4:1-3.