Perpetual Securities Singapore: Higher Yield, No Fixed Maturity Date
Perpetual securities are hybrid capital instruments with no fixed maturity date, paying investors a coupon indefinitely unless the issuer exercises a contractual right to call (redeem) the security on a specified future date, usually in exchange for a higher yield than ordinary bonds from the same issuer.
Not financial advice. All figures for educational reference only. Data as at November 2026.
Last updated: November 2026
Key Takeaways
- Perpetual securities have no maturity date and theoretically never repay principal, though issuers almost always call them at the first available call date to avoid reputational and funding cost penalties.
- Singapore banks issue Additional Tier 1 (AT1) perpetual securities to meet MAS capital adequacy requirements, while corporates and REITs issue perpetual capital securities to raise funding that is treated partly like equity on the balance sheet.
- Coupons on perpetuals can be deferred or, for bank AT1 instruments, even written down entirely in a crisis, without triggering a formal default.
- Perpetual securities rank below ordinary bonds but above equity in a liquidation, making them structurally subordinated within an issuer’s capital stack.
- Yields on Singapore perpetual securities are typically 1.5 to 3 percentage points higher than the same issuer’s ordinary bonds, compensating for the subordination and coupon deferral risk.
What Is Perpetual Securities?
Perpetual securities occupy an unusual middle ground between debt and equity. Structurally, they look like bonds — they pay a regular coupon, are issued with a face value, and trade on an exchange or over-the-counter — but unlike an ordinary bond, a perpetual security has no fixed maturity date at which the issuer is obligated to return the investor’s principal. Instead, the issuer typically retains a call option to redeem the security on a specified date (often 5 or 10 years after issuance) and periodically thereafter.
In Singapore, two broad categories dominate the perpetual securities market. The first is Additional Tier 1 (AT1) capital issued by Singapore banks — DBS, OCBC, and UOB have all issued AT1 perpetuals to meet MAS’s Basel III capital adequacy requirements. These instruments are specifically designed to absorb losses in a crisis: regulators can force a coupon deferral or even a permanent write-down of the AT1 instrument’s value if the bank’s capital ratios fall below a trigger level, all without it counting as a formal default. The second category is perpetual capital securities issued by corporates and REITs, which are typically treated partly as equity on the issuer’s balance sheet, improving reported leverage ratios compared to issuing ordinary debt of the same amount.
Because of the lack of a fixed maturity and the subordination to ordinary bondholders, perpetual securities pay a meaningfully higher coupon than conventional bonds from the same issuer. Singapore retail and accredited investors have been drawn to these higher headline yields, but the structural features that create that extra yield — perpetual tenor, coupon deferral rights, and deep subordination — are exactly what make these instruments materially riskier than they first appear.
How Does Perpetual Securities Work in Singapore?
A Singapore-issued perpetual security typically carries a fixed coupon for an initial period — say, the first 5 or 10 years — after which the coupon often resets to a new rate based on the prevailing benchmark (commonly SORA) plus a fixed spread, if the issuer chooses not to call the instrument at that point. Most perpetuals also include a step-up clause, where the coupon rises by a set margin if the issuer skips the first call date, creating a strong financial incentive for the issuer to redeem the security on schedule rather than leave it outstanding indefinitely.
Crucially, coupon payments on most perpetual securities are discretionary, not contractually mandatory in the way a bond coupon is. An issuer can choose to defer a coupon payment without that counting as a default, though many perpetuals include a ‘dividend stopper’ clause that prevents the issuer from paying ordinary share dividends while a perpetual coupon remains unpaid. Bank AT1 perpetuals go further still: MAS-regulated trigger clauses can force a permanent write-down of the instrument’s value if the bank’s capital adequacy ratio breaches a defined threshold, protecting depositors and senior creditors at the direct expense of AT1 holders.
In a liquidation, perpetual securities rank below senior and subordinated bonds but above ordinary and preference shares, placing holders near the bottom of the creditor stack — a position that matters far more in a stress scenario than it does in normal market conditions, where perpetuals mostly just trade and behave like unusually long-dated, higher-yielding bonds.
Perpetual Securities Example
A Singapore bank issues a SGD 500 million AT1 perpetual security with a 4.5% coupon for the first 5 years and a first call date at year 5. An investor buys SGD 50,000 of this perpetual, expecting to earn SGD 2,250 per year in coupons.
At year 5, the bank’s capital position is strong, and calling the instrument and refinancing at prevailing rates makes commercial sense, so the bank redeems the perpetual at par, returning the investor’s SGD 50,000 in full alongside the final coupon. Had the bank’s capital ratios instead fallen close to MAS’s regulatory trigger level during a stress period, the bank could instead have deferred the coupon or, in a severe enough scenario, permanently written down part or all of the SGD 50,000 principal — a risk that does not exist with an ordinary senior bank bond from the same issuer.
Advantages of Perpetual Securities
- Higher yield than ordinary bonds. Perpetual securities from the same issuer typically offer 1.5 to 3 percentage points more yield than conventional senior or subordinated bonds, compensating for added risk.
- Step-up coupons encourage early redemption. The step-up clause gives issuers a strong incentive to call perpetuals at the first opportunity, which has historically made early redemption the market norm rather than the exception.
- Issued by strong, well-known names. Singapore’s major banks and large REITs/corporates are the primary perpetual issuers, giving investors recognisable issuer credit quality even within a structurally riskier instrument.
- Tradeable liquidity. Larger benchmark-sized perpetual issues trade with reasonable secondary market liquidity compared to smaller retail bond issues.
Risks and Limitations
- No guaranteed maturity or repayment date. If an issuer never calls the perpetual, an investor could theoretically hold it indefinitely without ever recovering their principal through redemption.
- Coupon deferral risk. Issuers can skip coupon payments without defaulting, directly interrupting an investor’s expected income stream.
- Loss absorption for bank AT1 instruments. MAS-regulated trigger clauses can force a permanent write-down of an AT1 perpetual’s principal value in a banking crisis, a risk that does not exist for ordinary bonds.
- Extension risk. If an issuer skips a call date — which has happened occasionally in Asian perpetual markets during periods of market stress — the investor’s capital is locked in longer than originally expected.
- Deep subordination. In a liquidation, perpetual holders are repaid only after all bondholders, making recovery rates in a default scenario significantly lower than for senior debt.
Perpetual Securities vs Ordinary Corporate Bonds
| Feature | Perpetual Securities | Ordinary Corporate Bonds |
|---|---|---|
| Maturity date | None (callable, not maturing) | Fixed maturity date |
| Coupon obligation | Discretionary / deferrable | Contractually mandatory |
| Ranking in liquidation | Subordinated, near bottom | Senior or subordinated, above perpetuals |
| Typical yield premium | 1.5–3 percentage points higher | Baseline for the issuer |
| Loss absorption (bank AT1) | Possible principal write-down | Not applicable to senior bonds |
Source: MAS Basel III capital framework; issuer term sheets, 2026.
The Bottom Line
Perpetual securities offer Singapore investors meaningfully higher yield than ordinary bonds from the same issuer, but that extra yield is compensation for very real structural risk: no fixed maturity, discretionary coupons, and deep subordination that can mean steep losses for bank AT1 holders specifically in a severe crisis. They can have a place in a well-diversified fixed income allocation for investors who understand exactly what they are being paid to accept — but they should never be treated as a straightforward, higher-paying substitute for an ordinary government or corporate bond.
Frequently Asked Questions
What happens if a perpetual security is never called by the issuer?
If the issuer never exercises its call option, the investor continues holding the perpetual security indefinitely and keeps receiving coupons (assuming they are not deferred), but has no contractual right to force repayment of the principal.
Are perpetual securities safe investments in Singapore?
Perpetual securities are generally riskier than ordinary bonds from the same issuer because they lack a fixed maturity, allow coupon deferral, and rank near the bottom of the creditor stack in a liquidation, so they are not considered as safe as senior bonds or government securities.
Why do Singapore banks issue perpetual securities?
Singapore banks issue Additional Tier 1 (AT1) perpetual securities to satisfy MAS’s Basel III capital adequacy requirements, as these instruments can absorb losses in a crisis and count toward the bank’s regulatory capital in a way ordinary bonds cannot.
Can the principal of a perpetual security be written down?
Yes, for bank AT1 perpetuals specifically. If a bank’s capital ratios breach a regulatory trigger level, the perpetual’s principal can be permanently written down to protect depositors and senior creditors, a risk that does not apply to standard corporate bonds.
How are perpetual securities different from preference shares?
Perpetual securities are debt-like hybrid instruments that typically rank above preference shares and ordinary equity in a liquidation, and their coupons, while deferrable, are generally treated with more payment priority than discretionary preference share dividends.
