What are perpetual bonds?

What are perpetual bonds?
Perpetual bonds are bonds that do not have a set maturity date. Generally, the bonds cannot be redeemed at any point, but do generate some sort of return as long as the bond is held

and to compensate for the fact that investors can never redeem them – they pay a higher rate than other bonds with a similar credit profile.

The company that issues the perpetual bonds normally has an option to call them which means that they can decide to redeem the bonds at the end of certain time periods say 5 or 10 years
and the Tata Steel perpetual bond issue had a step up option also which means that if the bond is not called within a certain time frame then the company will have to pay a higher rate of interest on them. They issued the bonds at 11.8%, and if the company didn’t call the bonds within 10 years then the coupon rate would increase by 300 basis points.

The basic perpetual bond formula includes a fixed coupon amount that is in turn divided by a discount rate that is predetermined to account in part for economic inflation. This helps to put a cap on the value of the bond over time, even though the return on the bond issue is in the form of interest.

a perpetual bond tends to be a relatively stable investment that will continue to provide small amounts of profit for as long as the bond is active. This makes the bond an attractive option for investors who tend to be very conservative. However, a perpetual bond is never likely to yield a huge profit in a short period of time
These bonds are good for banks and other companies to raise money and shore up their capital and also good for pension funds who would like to lock on to the high interest rates