Investors Buying Vale Bonds on Speculation of Iron Ore Price Rebound

Bloomberg reported on Sunday that investors have been buying bonds sold by Vale SA (NYSE:VALE) on the back of news that iron ore prices may soon be on the rise again. Vale’s stock price has gone up 8.4 percent since June 16, according to Bloomberg.

As quoted in the publication:

Bond traders are betting rising iron-ore prices will help Vale rebound from a bigger-than-forecast drop in first-quarter profit that was fueled by plunging demand for the metal. Ore has climbed 8.9 percent since falling to $89 a ton on June 16 and is now set for a “dramatic recovery” in the second half as China’s economy improves and high-cost producers curb output, Sanford C Bernstein & Co. said in a report last week.

Fixed-income analyst at XP Investimentos CCTVM SA,  Fabiano Santin, told Bloomberg:

People look at the credit of Vale and they are very comfortable buying the yield that it was showing and holding on to it. For the short term, it will probably reflect what the economic indicators of China have been showing.

Click here to read the full Bloomberg article.