What is a Perpetual Bond?

What is a Perpetual Bond?

Perpetual bonds mean that investors will never receive their principal back and issuers will always pay interest. In this video Tim delves into the details of perpetuals and the potential benefits to investors and issuers.
Overview

Perpetual bonds are hybrid debt instruments that possess similarities with bonds and equity. The key feature of a perpetual bond is that there is no maturity date. The benefit of issuing a perpetual bond for a company is that it lowers their debt leverage. For an investor, it often offers a higher yield than other forms of debt on the market.

Key learning objectives:

  • Define a perpetual bond

  • Explain the purpose of a perpetual bond

  • What are the benefits on behalf of the issuer, and the investor?

  • Identify the risk of investing in a perpetual bond

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Summary
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