What is an Undated Issue?
Let me explain what an undated issue is: it's a government bond without a maturity date, meaning it pays interest forever.
Key Takeaways
You should know that an undated issue acts like a government bond with no end date, delivering interest payments indefinitely. From your perspective as a bond holder, it works much like a stock that pays dividends. Banks see these as Tier 1 capital, which helps them meet their reserve requirements.
Understanding Undated Issue
Technically, the term for an undated issue means interest payments go on forever, as agreed upon. As a holder, you'll get recurring interest much like dividends from a stock, over a very long time. That's why they're often called perpetual bonds or 'perps'.
The government could redeem it if they want, but they usually don't, especially since most have low coupons with little incentive to do so. These are treated as equity due to their perpetual nature, not debt. One key difference from other equity is no voting rights, so you have no say in the issuer's decisions.
For banks, these count as Tier 1 capital, including equity and reserves, making them useful for reserve requirements.
You can still find undated issues today, but they're not as sought after as municipal or Treasury bonds.
Undated Issues in History
These have been around for centuries. Many historians point to the British government as the originators, with the first recorded in the 18th century.
The most famous are the UK's undated bonds or gilts, known as gilt-edged securities. Until recently, there were eight, some from the 19th century. The biggest was the War Loan, at £1.9 billion with a 3.5% coupon from the early 20th century. But now, they're history in the UK—the last were redeemed in July 2015 by the chancellor.
Other articles for you
Return on Invested Capital (ROIC) measures how effectively a company uses its capital to generate profits and create value.
The Efficient Market Hypothesis (EMH) claims that stock prices always reflect all available information, making it impossible to consistently outperform the market.
EBITDA is a non-GAAP measure of a company's core profitability by adding back interest, taxes, depreciation, and amortization to net income.
The Americans with Disabilities Act (ADA) is a 1990 law that protects individuals with disabilities from discrimination in employment, public services, and accommodations.
A habendum clause defines the rights, interests, and ownership aspects in property-related contracts, commonly used in real estate and oil/gas industries.
IRS Publication 527 offers tax guidelines for reporting rental income from residential properties, including deductions and special rules.
Reverse culture shock is the emotional distress from readjusting to one's home culture after extended time abroad.
The West African CFA Franc (XOF) is the shared currency of eight West African nations, pegged to the euro for economic stability.
A bid price is the maximum amount a buyer is willing to pay for a security or asset, typically lower than the seller's ask price.
Wrap-up insurance is a comprehensive liability policy that covers all contractors and subcontractors on large construction projects to ensure adequate protection and avoid coverage gaps.