Investments in perpetual bond market: opportunities and risks

During the last two months Russian Eurobond market saw the emergence of a new and quite exotic instrument — perpetual bonds.

VTB pioneered, having placed a Eurobond worth $1.0 billion in early August. In late October VTB placed additional $1.25 billion; the total volume of the circulating issue amounted to $2.25 billion. Gazprombank also sold a perpetual bond worth $1.0 billion in October.

Both issuers offered quite a high premium to senior issues, thus allowing investors to gain additional income.

Amid extremely low interest rates that are now observed in most bond markets, perpetual bonds might be of interest for a certain class of investors.

In the present review we have carried out an analysis of the global perpetual bond market, found out what risks and opportunities are carried by perpetual bonds and offered the most interesting investment ideas.

Trading ideas in perpetual bond market:
• VTB;
• Gazprombank;
• HSBC;
• Banko do Brasil (Brazil);
• Rabobank (Netherlands).