"Timber, servicing debt would suggest it is not growing or its even decreasing.
When you service your home loan you are paying it "
As Krugman said: nobody understands debt.
DEFINITION of 'Perpetual Bond'
A bond with no maturity date. Perpetual bonds are not redeemable but pay a steady stream of interest forever. Some of the only notable perpetual bonds in existence are those that were issued by the British Treasury to pay off smaller issues used to finance the Napoleonic Wars (1814).
Some in the U.S. believe it would be more efficient for the government to issue perpetual bonds, which may help it avoid the refinancing costs associated with bond issues that have maturity dates.
A perpetual bond is also known as a 'consol'.
INVESTOPEDIA EXPLAINS 'Perpetual Bond'
Since perpetual bond payments are similar to stock dividend payments - as they both offer some sort of return for an indefinite period of time - it is logical that they would be priced the same way. The price of a perpetual bond is therefore the fixed interest payment, or coupon amount, divided by some constant discount rate, which represents the speed at which money loses value over time (partly because of inflation). The discount rate denominator reduces the real value of the nominally fixed coupon amounts over time, eventually making this value equal zero. As such, perpetual bonds, even though they pay interest forever, can be assigned a finite value, which in turn represents their price.
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From the ASX web site:
Simple and complex bonds
Bonds include a very broad array of different products that have markedly different terms and conditions. They range from so-called “simple bonds” to some very complex debt securities. (Read the
'Understanding bonds' booklet for more information). That’s why it’s so important to read the prospectus or term sheet for a bond to understand the particular terms and conditions that apply to that bond. A bond is regarded as a “simple bond” if:
- it has a fixed or floating coupon rate that does not change for the life of the security;
- interest payments under the security are paid periodically and cannot be deferred or capitalised by the issuer;
- it has a fixed maturity date which is not more than 15 years after its date of issue;
- it is not subordinated to other debts owed to unsecured creditors generally; and
- options).
Examples of more complex bonds include:
- bonds that allow the issuer to defer or capitalise interest payments under certain conditions;
- bonds that provide for the coupon rate to be re-set at certain times (often called “re-set” or “re-settable” bonds);
- bonds that give the issuer the option to extend them but at the price of paying a higher coupon rate (typically called “step-up bonds”); and
- bonds that are more properly characterised as “hybrid securities”, in that they combine features of debt securities and equity securities. Examples include convertible or converting bonds, perpetual bonds , subordinated bonds and knock-out bonds.
"SITES (ASX Code: MXUPA) stands for “Step-up Income-distributing Trust-issued Exchangeable Securities”. SITES are an older-style hybrid that are effectively
perpetual..."
