Perpetual Bond
A bond with no maturity date, paying interest indefinitely unless the issuer exercises a call option.
Formula
Price = Annual Coupon / Required Yield, for a perpetual stream with no redemption
Unit
₹
In depth
With no maturity, the holder can only recover principal by selling in the market or by the issuer calling the bond — there is no date on which repayment is owed. Market convention prices these to the first call date on the assumption the issuer will redeem, an assumption that fails precisely when the issuer is in trouble and cannot refinance. Because cash flows extend indefinitely, duration is very long and prices are highly sensitive to yield changes. In India these are most commonly bank Additional Tier 1 instruments, whose risks go well beyond the absence of a maturity date.
Worked example
A perpetual paying ₹90 a year prices at 90 / 0.09 = ₹1,000 at a 9% required yield. If the required yield rises to 11%, the price falls to 90 / 0.11 = ₹818 — an 18% loss from a two-point move.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Perpetual Bond” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.