Undated Issue

Key takeaways

• An undated issue is a government bond with no maturity date, paying interest indefinitely.
• Also called a perpetual bond or “perp,” it resembles a dividend-paying stock from the holder’s perspective.
• Banks may treat undated issues as Tier 1 capital because of their perpetual nature.
• Governments can redeem them, but redemption is uncommon—especially when coupons are low.

What is an undated issue?

An undated issue is a bond that has no set maturity date. Interest (coupon) payments continue indefinitely unless the issuer chooses to redeem the bond. Because the payments can last forever, these instruments are often referred to as perpetual bonds or perps.

How they work

• Holders receive recurring interest payments without a scheduled principal repayment.
• Issuers may include a call option allowing redemption, but many such issues remain outstanding for decades because low coupon rates reduce the incentive to call them.
• For investors, the income characteristics are similar to those of a dividend-paying stock, although perpetual bonds are debt instruments and typically do not confer ownership rights or voting power.

Regulatory and banking treatment

Undated issues are frequently treated like equity for regulatory capital purposes. Many banks consider them a form of Tier 1 capital—alongside equity and disclosed reserves—because their perpetual nature strengthens capital buffers. This makes them useful for meeting certain capital reserve requirements.

Historical context and examples

Undated issues have a long history, with notable early examples in the United Kingdom. U.K. government undated bonds, known as gilts, were issued as far back as the 18th and 19th centuries. One well-known example is the War Loan—issued in the early 20th century with a coupon around 3.5% and a large issue size. Many long-standing gilts were eventually redeemed; the last remaining undated gilts in the U.K. were redeemed in 2015.

Why they’re less common today

Undated issues still exist but are less sought after than standard Treasury or municipal bonds. Factors include:
* Lower liquidity and less market demand compared with conventional bonds.
Coupon rates on many legacy perps are low, limiting investor appeal.
For investors seeking predictable principal repayment, fixed-maturity bonds are preferable.

Conclusion

Undated issues (perpetual bonds) provide indefinite income streams and can serve regulatory capital roles for banks, but they lack maturity and voting rights and are relatively rare in modern financial markets. When available, they suit investors prioritizing long-term income over capital repayment.