Paying 10% Dollar Yield, Obscure Vale Bond Is Now Talk of Brazil
- Notes pay out twice as much as Vale’s conventional USD debt
- And a big chunk of supply is about to hit the market
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It’s a very odd security, technically a perpetual bond from Vale SA that pays out when the Brazilian mining giant’s ore output reaches certain thresholds. And for years, few in Sao Paulo financial circles seemed to notice it, with prices stuck at just a few cents in thin trading.
But investors are giving the notes a fresh look, and prices are soaring. The appeal is that while the bonds are sold in the local currency, the payout is based on Vale’s dollar revenue. That means securities from an investment-grade company will pay a dollar yield of about 10% this year, an almost unheard of figure in a world where global central banks have done their best to hold down interest rates.