The world’s oldest bond, issued in 1648 by the Hoogheemraadschap Lekdijk Bovendams in the Netherlands to fund repairs to flood defences on the Lek River, still pays interest 375 years after its issuance.
The bond is owned today by Yale University, which purchased it in 2003 for its history of finance archive.
It is stored in Yale’s Beinecke Rare Book & Manuscript Library. The university periodically sends its curator to collect interest from Stichtse Rijnlanden, a Dutch water authority.
Collecting the back interest maintains the bond’s status as a functioning artefact from the Golden Age of Dutch finance.
It is a perpetual bond, meaning the issuer is obligated to pay interest indefinitely. The only way for the issuer to stop paying interest is to default on its debt.
According to the water authority, Yale’s bond is one of only five known to exist.
Yale’s bond, written on goatskin, was issued on 15 May 1648 to Niclaes de Meijer for the “sum of 1,000 Carolus Guilders of 20 Stuivers a piece”.
The bond would pay 5% interest in perpetuity, but the rate was reduced to 3.5% and then 2.5% during the 17th century.
It is a bearer bond, meaning anyone who presents the addendum to the issuing authority can collect the interest. The water board kept no register of ownership of the bond.
The bond pays an annual interest rate of 2.5% on the principal of 1,200 Dutch guilders. Due to the effects of inflation and currency changes, the bond now only pays out about €15 (R299) per year.
Despite its low payout, the bond is a significant historical artefact. It is a reminder of the long history of debt financing and the important role that bonds play in the financial system.
The bond is also a symbol of Dutch history. The Netherlands has a long history of flooding, and it was issued during a time of great economic prosperity in the Netherlands.
The Dutch Golden Age (1581-1672) was a period of rapid economic growth and cultural flourishing. The Netherlands was at the forefront of global trade and finance during this time.
They developed new financial instruments, such as the bond and stock market, which helped fuel their economic growth.
The Collection of Financial History at Yale also features a bond issued circa 1622 by the Dutch East India Company, the first modern corporation. Unlike the water bond, it no longer pays interest.