Business & Finance, History & Heritage

A 367-year old bond still paying interest


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I read an article yesterday on Bloomberg: “Yale to Be Paid Interest on Dutch Water Authority Bond From 1648.” That’s amazing!

Twelve years ago, Yale University’s rare books and manuscripts library purchased a bond issued by a Dutch water authority in 1648 to fund the construction of a small pier in the Netherlands’s Lek river. The thing is, the bond pays out in perpetuity, and that water authority still exists, so Yale checked to find out whether it was still earning interest. Yes, it is! The 1,000 Carolus guilder-bond (US$512), which is written on goatskin, is among five of the world’s oldest bonds that still pay interest.

The 1,000 Carolus guilder-bond was issued at 5 percent interest on May 15, 1648. The currency in use in 1648,  Carolus guilder worth 20 stuivers has been succeeded by the Flemish pound, then the guilder and finally the euro. The bond now pays 11.34 euro (US$12.80) annually, which is the modern equivalent of 25 guilders, the interest rate having been reduced to 2.5 percent during eighteenth century (Krantz & Parks, 2014, p.32).

Image Credit: Bloomberg (Source: Beinecke Library/Yale University)

In recent years, at least four seventeenth-century bonds issued by Hoogheemraadschap Lekdijk Bovendams — a Dutch water board responsible for upkeep of local dykes — have been presented to the successor organisation  (namely, Dutch water authority de Stichtse Rijnlanden) for payment of interest. The oldest of these bonds dates from 1624 (Krantz & Parks, 2014, p.32).

1648 Dutch Bond
Image Credit: Bloomberg (Source: Beinecke Library/Yale University)

Yale University paid 24,000 euros to acquire the bond in 2003 as an artefact. The university hasn’t been paid interest since the acquisition.  Yale will receive 136.08 euros (US$154) in interest from Dutch water authority de Stichtse Rijnlanden. The money will be paid out on Monday.

The bond is actually older than Yale itself, which was founded in 1701. David De Jong has truly said in that article: “Some perpetual bonds are more eternal than others.”

Reference

Krantz, Steven G. and Harold R. Parks. 2014. Mathematical Odyssey: Journey from the Real to the Complex. Springer.

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