What does a perpetual bond mean?

"Perpetual bond" is a bond that has no end date and is therefore not redeemed. The issuer only pays interest, without the obligation to ever repay the principal.

Because these bonds have no final maturity date, it is difficult to calculate an exact effective return. A well-known example in the Netherlands is the Dutch government's ledger loans, which still pay interest.

In practice, many loans that are labeled as "perpetual" are eventually repaid by the issuing institution. This happens at a time that the institution itself chooses, which in jargon is called "calling." Perpetual bonds are mainly issued by financial institutions because, due to their long maturity, they are considered risk-bearing capital.