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World's oldest bond is gearing up for its 400th birthday. It's still paying interest

MICHEL MARTIN, HOST:

The New York Stock Exchange is the location for billions of dollars in financial trades every day. It is also home to a 400-year-old bond that continues to pay out interest. Our colleagues at the Indicator from Planet Money, Brittany Cronin and Wailin Wong, bring us the story of the oldest living bond.

WAILIN WONG, BYLINE: We are going to start our story in a region of the Netherlands called Utrecht, about 25 miles south of Amsterdam. It is January of 1624, and there is a disaster unfolding.

BRITTANY CRONIN, BYLINE: Drifting ice has broken through a dike on an offshoot of the Rhine River. This results in a major flood. Jeroen Haan chairs the board of the Dutch water utility that oversees Utrecht today.

JEROEN HAAN: When the flood appeared, it almost reached Amsterdam and Rotterdam, which is about 40 kilometers away. So the whole dike had to be replaced afterwards, and then this required a lot of money.

WONG: There was actually a local water authority back in the 1600s, and they needed funds to replace the dike, so it decided to sell bonds. The utility borrowed money from the people who purchased the bonds, and in exchange, it agreed to pay those bondholders interest.

CRONIN: And this is still the way bonds work today. Robin Wigglesworth at the Financial Times says the Dutch were the ones who figured out this structure.

ROBIN WIGGLESWORTH: Really, the bond in its modern shape, I'd say, was probably born in the Netherlands. And the Dutch really kind of invented modern capitalism as we think of it today.

WONG: Bonds became a way to fund all kinds of human activity.

WIGGLESWORTH: Building the skyscrapers of New York, that was largely financed by bonds. Railways, canals, electricity, Tesla's cars, what we watch on Netflix - it's all financed by bonds.

CRONIN: Robin says one important characteristic of a bond is that it is tradeable. Whoever initially buys a bond can sell it or give it to someone else, and then the new owner of that bond gets to collect interest on it until the bond expires.

WONG: But there is a twist when it comes to the bond that this Dutch water authority issued in 1624. It didn't have an expiration date, so it's what's called a perpetual bond. The interest? It pays out forever. And back in the 1600s, the water authority issued a bunch of these bonds to come up with the cash it needed.

CRONIN: Perpetual bonds are still issued today. Some governments like them because they technically don't ever have to repay the upfront amount they borrowed, they just continue to make interest payments.

WONG: As we heard earlier, the New York Stock Exchange got the oldest one, that one from 1624. Pete Asch is the chief historian of the New York Stock Exchange, and he says the bond was a gift from the Amsterdam Stock Exchange.

PETE ASCH: One of their board members brought the bond with them from Holland, and so that's how it ended up with us. It's about 13 inches by 24 inches, so it's a pretty, you know, big piece of paper to stick in your pocket, but at the same time, you know, not a giant piece to have 400 years of history on it.

WONG: Today, that interest is paid by the present-day regional water authority. As the chair, Jeroen Haan sets aside the money every year. For the 1624 bond, the annual interest works out to 13 euros and 61 euro cents.

HAAN: We still have to pay, and it's a great story.

WONG: And Jeroen says, for him, these perpetual bonds link him to his predecessors, all of the people who came before him who took on the responsibility of safeguarding the country's water infrastructure.

CRONIN: Brittany Cronin.

WONG: Wailin Wong, NPR News.

(SOUNDBITE OF WU-TANG CLAN SONG, "C.R.E.A.M.") Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Wailin Wong
Wailin Wong is a long-time business and economics journalist who's reported from a Chilean mountaintop, an embalming fluid factory and lots of places in between. She is a host of The Indicator from Planet Money. Previously, she launched and co-hosted two branded podcasts for a software company and covered tech and startups for the Chicago Tribune. Wailin started her career as a correspondent for Dow Jones Newswires in Buenos Aires. In her spare time, she plays violin in one of the oldest community orchestras in the U.S.
Brittany Cronin
Brittany Cronin covers cars, energy and the future of mobility for NPR's Business desk.