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A '''perpetual bond''', also known colloquially as a '''perpetual''' or '''perp''', is a [[Bond (finance)|bond]] with no [[maturity date]],<ref>[http://wps.pearsoned.co.uk/wps/media/objects/1669/1709773/0273685988_ch04.ppt#264,10,Different Types of Bonds: The Valuation of Long-Term Securities]</ref> therefore allowing it to be treated as [[Equity (finance)|equity]], not as [[debt]]. Issuers pay [[Coupon (bond)|coupon]]s on perpetual bonds forever, and they do not have to redeem the [[Bond (finance)#Principal|principal]]. Perpetual bond [[cash flows]] are, therefore, those of a [[perpetuity]].

==Perpetual bonds vs. equity==
* Although similar to equity, perpetual bonds do not have attached votes and, therefore, provide no means of control over the issuer.
* Perpetual bonds are still [[fixed-income]] securities; therefore, paying coupons is mandatory whereas paying dividends on equity is discretionary.

==Examples ==
* [[Consols]] that were issued by the United States and the UK governments.
* [[War bond]]s issued by a number of governments to finance war efforts in the first and second world wars.
* The oldest example of a perpetual bond was issued on 15 May 1624 by the [[Water board (Netherlands)|Dutch water board]] of Lekdijk Bovendams and sold to [[Elsken Jorisdochter]].<ref>{{Cite web |title=Oldest active bond |url=https://www.guinnessworldrecords.com/world-records/549529-oldest-active-bond |access-date=2022-11-20 |website=Guinness World Records |language=en-gb}}</ref><ref>{{Cite news |last=Wigglesworth |first=Robin |date=2023-08-09 |title=The world’s oldest living bond |work=Financial Times |url=https://www.ft.com/content/9a13d322-bab7-4463-99c6-972cfe0eb4ec |access-date=2023-09-30}}</ref> Only about five such bonds from the [[Dutch Golden Age]] are known to survive by 2023.<ref name="KGR">{{cite journal |last1=Goetzmann |first1=William N. |last2=Rouwenhorst |first2=K Geert |title=Infinity has a price |journal=Yale Alumni Magazine |date=2023 |volume=86 |issue=4 |pages=48-49 |url=https://yalealumnimagazine.org/articles/5627-infinity-has-a-price |access-date=11 March 2023}}</ref> Another of these bonds, issued in 1648, is currently in the possession of [[Yale University]].  Yale bought the document for its history of finance archive at auction in 2003, at which time no interest had been paid on it since 1977.  Yale Professor [[Geert Rouwenhorst]] travelled in person to the Netherlands to collect the interest due.<ref name="KGR" /> Interest continues to accumulate on this bond, and was most recently paid in 2015 by the eventual successor of Lekdijk Bovendams ([[Water board (Netherlands)#List of water boards|Hoogheemraadschap De Stichtse Rijnlanden]]).<ref>{{Citation |last=Scott |first=Tom |title=The centuries-old debt that's still paying interest |url=https://www.youtube.com/watch?v=cfSIC8jwbQs |work=[[YouTube]] |language=en |access-date=2022-11-20}}</ref> Originally issued with a principal of "1000 silver {{Ill|Carolusgulden|lt=Carolus gulders|nl|Carolusgulden}} of 20 [[Stuiver]]s a piece", as of 2004 the yearly interest payment to the bondholder is set at €11.35. According to its original terms, the bond would pay 5% interest in perpetuity,<ref>{{Cite web|last=Cummings|first=Mike|date=2015-09-22|title=Yale's 367-year-old water bond still pays interest|url=https://news.yale.edu/2015/09/22/living-artifact-dutch-golden-age-yale-s-367-year-old-water-bond-still-pays-interest|access-date=2021-11-15|website=YaleNews|language=en}}</ref> although the interest rate was reduced to 3.5% and then 2.5% during the 18th century.<ref>{{Cite web|last=Choudhury|first=Indrajit Roy|date=2015-09-16|title=Some Perpetual Bonds Are More Eternal Than Others|url=https://indroyc.com/2015/09/17/a-367-year-old-bond-still-paying-interest/|access-date=2021-11-15|website=Indrosphere|language=en}}</ref>
* Most perpetual bonds issued in the present day are deeply subordinated bonds issued by banks. The bonds are counted as [[Tier 1 capital]] and help the banks fulfill their [[capital requirements]]. Most of these bonds are [[Callable bond|callable]], but the first call date is never less than five years from the date of issue—a call protection period.{{Citation needed|date=June 2024}}

==Pricing==
{{Confusing section|date=September 2024|reason=it uses too many unexplained technical terms}}
Perpetual bonds are valued using the formula:

:<math>\text{Price} = \frac{I}{y}</math>

where:
*<math>I</math> is an annual coupon interest on a bond.
*<math>y</math> is an expected yield for maximum term available.<ref>{{Cite web |url=http://faculty.business.utsa.edu/kfairchild/classes/5023/BONDVALU.doc |title=BOND VALUATION |access-date=2010-10-03 |archive-url=https://web.archive.org/web/20150421142811/http://faculty.business.utsa.edu/kfairchild/classes/5023/BONDVALU.doc |archive-date=2015-04-21 |url-status=dead }}</ref>

==See also==
* [[Bond market]]
* [[Security (finance)#Debt |Debt securities]]
* [[Fixed income]]
* [[Government bond]]
* [[Perpetual subordinated debt]]
* [[Subordinated debt]]
* [[War bond]]

==References==
{{Reflist}}

==External links==
*[http://www.livemint.com/2007/07/30171523/Perpetual-debt-in-favour-but.html "Perpetual debt in favour, but yields may fall"], LiveMint.com, July 7, 2007

{{bond market}}

{{short description|Financial bond with no maturity date}}

{{DEFAULTSORT:Perpetual Bond}}
[[Category:Bonds (finance)]]


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