When you buy or subscribe for an interest rate security, you are lending money to a government, corporation or other entity, known as the issuer. One of the key features of any interest rate security is its maturity. The maturity tells you when you should expect to get your principal back and how long you can expect to receive interest payments. Perpetuals are securities without a maturity to date. Perpetuals' are interest rate securities without a maturity date.
Investors get their money back when they sell the securities in the secondary market.
Therefore, in assessing whether to buy perpetuals, investors should take into account the potential liquidity risk. That is 'what will be the likely ability to sell these securities in the secondary market in the future'. Typically perpetuals pay a floating rate of interest and often have a call provision. This floating coupon is usually adjusted in line with movements in an underlying benchmark. For example 90 day bank bills.