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A bond in which the issuer does not repay the principal. Rather, a perpetual bond pays the bondholder a fixed coupon as long as he/she holds it. Prices for perpetual bonds vary widely according to long-term interest rates. When interest rates rise, perpetual bonds fall and vice versa. Perpetual bonds are most common in the United Kingdom, where they were used originally to pay for the military.
A debt instrument having no scheduled return of principal and therefore perpetual interest payments and no maturity. Consols fluctuate widely in price with changes in long-term interest rates. They have never been popular in the United States. Also called annuity bond, perpetual bond. See also perpetuity.