The 17th Century Bond That’s Still Paying Interest

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unknownfuture
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The 17th Century Bond That’s Still Paying Interest

Post by unknownfuture »

https://www.amusingplanet.com/2018/08/t ... l.html?m=1

Interesting article on 370 year old bonds that are still paying interest today.

"[...] There are some bonds issued way back in the 17th century that are still paying out interest. These bonds were issued by Hoogheemraadschap Lekdijk Bovendams, a Dutch water board responsible for managing dikes and canals in the lower Rhine region in the Netherlands. In 1648, the water board floated a perpetual bond to raise money for the construction of a series of piers to regulate the flow of a river and prevent erosion.

The bonds were priced at 1,000 guilder each, which is worth about $500 in today’s price, and had a perpetual interest rate of 5%. The rate was later reduced to 3.5% and then 2.5% during the 17th century itself."
samsdad
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Re: The 17th Century Bond That’s Still Paying Interest

Post by samsdad »

Fascinating article in the link. Thanks for sharing.
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Phineas J. Whoopee
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Re: The 17th Century Bond That’s Still Paying Interest

Post by Phineas J. Whoopee »

Yeah. They're consuls, as stated in the article. In the United States there can't be any, because contracts must have an end date, and bonds are contracts. That doesn't mean US people can't buy foreign bonds, unless the issuing sovereign is under sanctions.

Consuls do not fit into the Yield to Maturity, YTM, calculation.

In the US contracts cannot legally be perpetual.

PJW
Small Law Survivor
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Re: The 17th Century Bond That’s Still Paying Interest

Post by Small Law Survivor »

Hmmm .. thought a contract could be perpetual. If Coca Cola discloses to me the formula for Coke, and I agree to treat it as a trade secret and not disclose it, ever, it' enforceable indefinitely (so long as the trade secret doesn't become generally known, in which case it would no longer be a trade secret).

A perpetual contract like this would be rare, but in theory there's nothing stopping Coca Cola from maintaining that formula forever, and holding me to my perpetual nondisclosure.
69 yrs, semi-retired lawyer, 50/40/10 s/b/c, 70/30 dom/int'l. Plan: 4% WR until age 70, 3% after social security kicks in. Boglehead since day 1 (and M* Diehard before that) under various other names
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Phineas J. Whoopee
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Re: The 17th Century Bond That’s Still Paying Interest

Post by Phineas J. Whoopee »

Small Law Survivor wrote: Sat Mar 23, 2019 5:54 pm Hmmm .. thought a contract could be perpetual. If Coca Cola discloses to me the formula for Coke, and I agree to treat it as a trade secret and not disclose it, ever, it' enforceable indefinitely (so long as the trade secret doesn't become generally known, in which case it would no longer be a trade secret).

A perpetual contract like this would be rare, but in theory there's nothing stopping Coca Cola from maintaining that formula forever, and holding me to my perpetual nondisclosure.
Your post contradicts itself.

PJW
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tooluser
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Re: The 17th Century Bond That’s Still Paying Interest

Post by tooluser »

Small Law Survivor wrote: Sat Mar 23, 2019 5:54 pm Hmmm .. thought a contract could be perpetual. If Coca Cola discloses to me the formula for Coke, and I agree to treat it as a trade secret and not disclose it, ever, it' enforceable indefinitely (so long as the trade secret doesn't become generally known, in which case it would no longer be a trade secret).

A perpetual contract like this would be rare, but in theory there's nothing stopping Coca Cola from maintaining that formula forever, and holding me to my perpetual nondisclosure.
That's a contract for life, not in perpetuity.
The discovery of America, and that of a passage to the East Indies by the Cape of Good Hope, are the two greatest and most important events recorded in the history of mankind. -- Adam Smith, 1776
aspiringboglehead
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Re: The 17th Century Bond That’s Still Paying Interest

Post by aspiringboglehead »

There is no general rule in American law against perpetual contracts. It is important to distinguish between the presumption that an indefinite contract is terminable at will (which does exist, though it is poorly justified as a matter of interpretive policy -- indeed, its lack of interpretive soundness may suggest that courts disfavor perpetual contracts unless the parties' intentions are clear) and a mandatory legal rule preventing a contract from lasting forever (which generally doesn't). As in most areas of law, there are exceptions; for example, under many states' laws, a local government cannot issue a perpetual contract without permission from the legislature.

(The "rule against perpetuities" in property law also tends to confuse people -- including many of my law students -- but it poses no restrictions on the duration of a contract in the general case. It is not, in other words and despite its name, a rule against perpetual arrangements; it has a narrow, complicated meaning and its effect is simply to invalidate certain transfers of property that do not vest during an appropriate period.)
Valuethinker
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Re: The 17th Century Bond That’s Still Paying Interest

Post by Valuethinker »

unknownfuture wrote: Fri Mar 22, 2019 11:39 pm https://www.amusingplanet.com/2018/08/t ... l.html?m=1

Interesting article on 370 year old bonds that are still paying interest today.

"[...] There are some bonds issued way back in the 17th century that are still paying out interest. These bonds were issued by Hoogheemraadschap Lekdijk Bovendams, a Dutch water board responsible for managing dikes and canals in the lower Rhine region in the Netherlands. In 1648, the water board floated a perpetual bond to raise money for the construction of a series of piers to regulate the flow of a river and prevent erosion.

The bonds were priced at 1,000 guilder each, which is worth about $500 in today’s price, and had a perpetual interest rate of 5%. The rate was later reduced to 3.5% and then 2.5% during the 17th century itself."
You star!

Thank you.

I knew about the perpetual War Loan of 1842 which the UK government retired (consols) quite recently but nor this one.
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Random Musings
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Re: The 17th Century Bond That’s Still Paying Interest

Post by Random Musings »

Those bonds take staying the course to a whole different level.

RM
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bhsince87
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Re: The 17th Century Bond That’s Still Paying Interest

Post by bhsince87 »

I can hear the critics back in the day:

"Our grandchildren's grandchildren's grandchildren's grandchildren's grandchildren's grandchildren's grandchildren's grandchildren's grandchildren will still be paying interest on this debt!"
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TheGreyingDuke
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Re: The 17th Century Bond That’s Still Paying Interest

Post by TheGreyingDuke »

When I was administrating my father's estate I found some bearer bonds from Canadian Pacific that were in perpetuity. There was no makret for them and the only thing I could do was to have CP buy them back. If I recall, they paid 4% but it was too much of a hassle for too little return to hold onto them.
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wootwoot
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Re: The 17th Century Bond That’s Still Paying Interest

Post by wootwoot »

How can these be considered bonds when the payout is variable?
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Bammerman
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CONSOL, not consul

Post by Bammerman »

Phineas J. Whoopee wrote: Sat Mar 23, 2019 5:48 pm Yeah. They're consuls, as stated in the article. In the United States there can't be any, because contracts must have an end date, and bonds are contracts. That doesn't mean US people can't buy foreign bonds, unless the issuing sovereign is under sanctions.

Consuls do not fit into the Yield to Maturity, YTM, calculation.
CONSOL, not consul. I was a consul, so I ought to know. Consol defined here: https://www.dictionary.com/browse/consol Consul defined here: https://www.dictionary.com/browse/consul?s=t. Bernstein has an interesting history of consols in his book The Four Pillars of Investing. Or you can read the Wikipedia article here: https://en.wikipedia.org/wiki/Consol_(bond)
dkturner
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Re: The 17th Century Bond That’s Still Paying Interest

Post by dkturner »

TheGreyingDuke wrote: Sun Mar 24, 2019 5:48 pm When I was administrating my father's estate I found some bearer bonds from Canadian Pacific that were in perpetuity. There was no makret for them and the only thing I could do was to have CP buy them back. If I recall, they paid 4% but it was too much of a hassle for too little return to hold onto them.
I ran into a similar situation in the 1980s. While settling an estate I found some Atchison, Topeka & Santa Fe coupon bonds issued in 1896 that matured in 1996. I don’t recall the interest rate. I distributed them to the heirs who, presumably, clipped the coupons until 1996 then tendered the bonds to the bond trustee.
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Phineas J. Whoopee
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Re: CONSOL, not consul

Post by Phineas J. Whoopee »

Bammerman wrote: Mon Mar 25, 2019 7:50 am
Phineas J. Whoopee wrote: Sat Mar 23, 2019 5:48 pm Yeah. They're consuls, as stated in the article. In the United States there can't be any, because contracts must have an end date, and bonds are contracts. That doesn't mean US people can't buy foreign bonds, unless the issuing sovereign is under sanctions.

Consuls do not fit into the Yield to Maturity, YTM, calculation.
CONSOL, not consul. I was a consul, so I ought to know. Consol defined here: https://www.dictionary.com/browse/consol Consul defined here: https://www.dictionary.com/browse/consul?s=t. Bernstein has an interesting history of consols in his book The Four Pillars of Investing. Or you can read the Wikipedia article here: https://en.wikipedia.org/wiki/Consol_(bond)
Thank you for the correction.

PJW
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