Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
Perpetual bonds
Market terminology

Why perpetual bonds are profitable to invest in

22.07.2021
2 min read

Perpetual bonds: difference from other types of securities

Perpetual, they are also consol bonds, which have no definite term to maturity. This means that the investor cannot get a refund from the issuer. However, he has the opportunity to sell such bonds at the stock exchange or receive fixed income from them for a long time.
It should be understood that the term “perpetual bonds” is not interpreted literally. The issuer at the time of the transaction can denote the period after which it is possible to repurchase the bonds through a call option, usually up to 10 years.
The main advantage of perpetual bonds is a fixed rate of return, which, compared to conventional bonds, has a rather large indicator. This type of securities is also called rent. However, it should be understood that the level of income from perpetual bonds depends on interest rates, which are accepted in the country. As the latter increase, the yield from the securities decreases, and they become cheaper at the exchange. In turn, when interest rates are reduced, consol bonds become more profitable.
For example, an investor has bought such securities with a fixed rate of income at 7% per annum, when the key rate was 5%. Over time, the latter rose to 8% per annum. Accordingly, the cost of credit has also increased, and the attractiveness of bank deposits increased. At the same time, the demand for perpetual bonds has decreased, and their yield is almost the same as the inflation rate in the country. This point refers to the risks of investing in securities.

Perpetual bonds

When buying perpetual bonds, the investor receives a coupon income exceeding the market average. This factor is a profitable advantage for those who want to invest for a long term. At the same time, one should not be afraid of low liquidity.
In addition, perpetual bonds are also suitable for short-term investments if you work with them during a crisis, when the currency is depreciating and credit rates are increasing. In such a period, you can buy securities at a low price and then sell them at a higher price after economic recovery.
For the first time, perpetual bonds appeared in the UK in 1753, they were issued by the Bank of England, and they are still represented on the exchange in London at a coupon rate of 2.5 per annum. In 1923, Parliament issued a decree that the bonds can be redeemed at any time when the government deems it necessary.
Another popular perpetual bond is the Coca-Cola Corporation, which was issued in 1993. Their maturity date is 2093. The amount of income is 7.3 percent.

Tags: Market terminology
0
Previous Post U.S. has hit China's technology sector Next Post Will the Russian ruble strengthen until the end of 2021: forecasts from Credit Suisse

You Might Also Like

profit capitalization
Market terminology
Profit capitalization: features and functions
25.09.2020
contract for difference
Market terminology
How convenient is the contract for difference: features of the instrument
12.07.2021
Clearing activity in the market
Market terminology
What is a clearing activity in the market and its advantages
27.07.2020
The concept of financial management-1
Market terminology
The concept of financial management in terms of the investment horizon
18.05.2022
Structured bonds
Market terminology
Structured bonds: an overview of a financial instrument
30.07.2022
Types of market strategies
Market terminology
Types of market strategies in trading activities and their features
29.11.2021

Recent Posts

  • 1Apple Search
    Apple Corporation is working on its own search engine, Apple Search
    28.01.2023
  • 2Tom Ford brand
    Estee Lauder made a deal to buy the fashion brand Tom Ford
    27.01.2023
  • 3Golden Visa
    The Golden Visa program has brought Portugal more than 6 billion euros during its existence
    26.01.2023
  • 4Michael Steinhardt
    Michael Steinhardt: the story of a prominent American investor
    25.01.2023
  • 5Cessna
    The Cessna aircraft company: how it all began
    24.01.2023

Popular Posts

  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Skolkovo analysts: the Russian energy market is suffering losses
  • JPMorgan Chase Co – a giant in the market of financial services

Social media

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Spokesperson
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Spokesperson
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Spokesperson
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Spokesperson
16.05.2020

Latest Posts

Bybit
Cryptocurrency exchange Bybit provided information about the volume of stored assets
29.01.2023
Apple Search
Apple Corporation is working on its own search engine, Apple Search
28.01.2023
Tom Ford brand
Estee Lauder made a deal to buy the fashion brand Tom Ford
27.01.2023

Chaslau Koniukh

Expert Chaslau Koniukh

Chaslau Koniukh – an expert in marketing and project management, IT consulting, international investments, investor, financial analyst. A commodity trader, private consultant, entrepreneur, lecturer, author of several articles on the stock market.

Popular Posts

  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Skolkovo analysts: the Russian energy market is suffering losses
  • JPMorgan Chase Co – a giant in the market of financial services
  • How was the BRICS forum in the capital of Brazil?
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram
  • Biography

Chaslau Koniukh – an expert in marketing and project management, international investments, financial analyst.

Social media

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics