An undated issue is a type of bond that lacks a maturity date. This means the bondholder will not receive a one-time payment of principal upon the bond's expiration but will instead receive regular income payments in perpetuity. From the bondholder's perspective, an undated issue is similar to a dividend-paying stock.

Banks consider undated issues to be a form of Tier 1 capital, which is a regulatory requirement for banks, to ensure the safety and soundness of the banking system. Tier 1 capital generally consists of a bank’s common equity and disclosed reserves and is used to buffer against unexpected losses. With an undated issue, banks are able to fulfill their Tier 1 capital requirements and fully utilize it to have a larger Tier 1 capital portfolio.

Undated issues also provide a hedge against inflation, as they provide an above-market return of invested capital. The portion of the interest payments that represent the return of principal is not taxable since the principal is not returned. Therefore, it can allow bondholders to generate a real return (an inflation-adjusted return) that increases in value.

In addition, due to their lack of maturity date, undated issues are less likely to be affected by fluctuations in interest rates. This makes them attractive to investors who are worried about the impact of rising rates on their investment returns.

Overall, undated issues provide investors with a secure and relatively low-risk form of investment. They offer a secure stream of income that is relatively certain to last for a long time and are also inflation-proof. This makes them an attractive option for long-term investors who are looking for a stable income stream and do not wish to be forced to sell the bonds prematurely. Furthermore, as an investment option for banks, an undated issue can be an effective way of meeting regulatory requirements pertaining to capital reserving.