This 17th-century Dutch Bond Still Pays Interest

November 20th, 2015 by

Yale_University_LogoDuring the 17th century, corporate bonds were sometimes issued as perpetual securities. In other words, they continued to bear interest into perpetuity—forever.

Granted, in most cases, the bonds would be defaulted on by the issuers at some point—in many cases, once government entities got involved. However, in one exceedingly rare case, there is a goat-skin parchment used for a Dutch corporate bond dating to 1648 stored in the Yale University library. Unbelievably, this debt obligation is still valid!

Funding Public Water Projects

The debt was a water bond issued by the Hoogheemraadschap Lekdijk Bovendams, a collection of wealthy businessmen and landowners in Holland. The proceeds from the sale allowed the group to construct a pier that still stands today. This is how the water board raised money for all sorts of similar projects, which were especially important in a country that boasts more dikes than any other in the world, and has for centuries. The bond was initially for 1,000 gulden or guilders, and is one of just 5 examples of unbroken perpetual bonds in the world. The organization descended from the original 17th-century water board that issued the bond is still active.

Source: Yale News

Source: Yale News

A Relic from the Dutch Golden Age

The historic parchment, a valuable artifact even if it were defunct as a financial asset, arrived to Yale in 2003 for the neat sum of €24,000. This year, the 12 intervening years’ worth of back-interest owed was collected by Yale—totaling a cool $153.

Source: Bloomberg

Source: Bloomberg

As a “bearer bond,” whosoever presents the bond to the Dutch water authority can legitimately collect the interest—but they must have the document on-hand, because all interest payments were recorded directly on the ledger. Understandably, Yale does not permit such an historic and fragile document to leave its library. To resolve this, an addendum attached to the bond in the 1940s (pictured, right) is allowed to travel back and forth to the Netherlands when interest is periodically collected.

Clearly, the historic oddity of the active water bond, hand-written on crude parchment, is far more valuable than the minuscule interest it pays. Nonetheless, you’d better believe they didn’t pass on the publicity of collecting that interest, no matter how small.

Clarion Wegerif, a spokesperson for the water board, admitted, “We’ll be handing out a symbolic check and [will] wire the rest.”