Undated Issue: Guide for Australian Investors (2026)

An undated issue, commonly known as a perpetual bond or security, is a debt instrument with no maturity date. Unlike traditional bonds, which have a set end date for repayment, undated issues pay interest indefinitely until the issuer chooses to redeem them. In 2026, these instruments are especially relevant as Australian institutions and corporations look for alternative funding mechanisms amid economic uncertainty and a shifting regulatory landscape.

• No fixed maturity: Investors receive interest payments for as long as the issuer remains solvent and does not redeem the issue.

• Callable feature: Most undated issues allow issuers to buy back the bond at specified intervals, typically after a set number of years.

• Higher yields: To compensate for the lack of maturity, undated issues often offer higher interest rates than dated bonds.

Several trends are pushing undated issues into the limelight in 2026:

• Interest Rate Volatility: As the Reserve Bank of Australia signals a cautious approach to rate changes, investors are seeking fixed-income products with attractive yields and flexible redemption features.

• Banking Sector Regulation: APRA’s 2024-25 regulatory updates have made it more attractive for banks to raise capital through undated hybrids, such as Additional Tier 1 (AT1) securities, to meet capital adequacy requirements.

• Investor Appetite for Yield: With global bond yields stabilising and equity markets showing volatility, undated issues offer a way to lock in competitive yields—albeit with unique risks.

For example, several major Australian banks, including NAB and Westpac, have issued new undated hybrid securities in 2026 to bolster their balance sheets, attracting both institutional and retail investors.

Undated issues can be a valuable addition to a diversified portfolio, but they come with distinct considerations:

• Income Stream: These securities can provide steady income, making them attractive for retirees and income-focused investors.

• Credit Risk: Because there’s no maturity date, repayment of principal depends on the issuer’s long-term financial health. In the event of financial distress, undated issues may be converted to equity or written off, as seen in recent European banking crises.

• Interest Rate Sensitivity: Perpetual bonds are more sensitive to interest rate movements than shorter-dated bonds. If rates rise, the market value of undated issues typically falls more sharply.

• Call Risk: Issuers may redeem the bond if it becomes advantageous, potentially leaving investors to reinvest at lower yields.

In 2026, ASIC and APRA have issued updated guidance for retail investors in undated hybrids, emphasising the need to understand the risks before committing significant capital.

Undated issues aren’t for everyone. They may suit investors who:

• Have a long investment horizon

• Seek higher yields and can tolerate credit and market risk

• Want exposure to financial sector hybrids or corporate perpetuals

However, they may not be suitable for those who need capital certainty or are uncomfortable with complex product structures.

As Australia’s financial markets continue to adapt to global shifts and local policy updates, undated issues are likely to remain a feature of the investment landscape. Whether you’re considering them for income or diversification, understanding the mechanics and risks is crucial for making informed decisions in 2026.