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:
“His breast was the seat of all those passions which degrade our nature, and disturb our reason. There they raged in a perpetual conflict; but avarice, the meanest of them all, generally triumphed, ruled absolutely, and in many instances, which I forbear to mention, most scandalously.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)
“Camillo. Prosperity’s the very bond of love,
Whose fresh complexion and whose heart together
Affliction alters.
Perdita. One of these is true:
I think affliction may subdue the cheek,
But not take in the mind.”
—William Shakespeare (1564–1616)