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Sometimes a company or a government issues bonds that never mature. They are called perpetual bond, and as the name suggests, they remain in force for as long as the issuer wishes to. This allows the bond holder to reap benefits for long periods.

While perpetual bonds sound like great long-term investment instruments, they are not. The only party that benefits from this kind of an arrangement is the bond issuer, because it allows them to raise money without ever needing to pay it back since these bonds never mature. The investor gets a yearly payout according to an interest rate defined by the issuer, which can change at any time and is usually kept low enough for the company to make a profit. And once inflation is factored into the equation, the value of the yearly payout starts diminishing the longer the investor holds on to the bond.

dutch-perpetual-bond-2

This 370-years-old bond is still paying interest.

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© Amusing Planet, 2018.


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