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Catastrophe bond market coupon falls 4.5% in August to under 8.9%
Plenum Investments said the overall coupon was just under 8.9% by August 28, down from 9.29% in July, and total yields have shifted below year-ago levels.
Catastrophe bond yields dropped in August as seasonal tightening in catastrophe bond spreads accelerated, with the overall coupon falling around 4.5% in the month, according to Plenum Investments data cited by Artemis. Plenum said the catastrophe bond market yield, described as the coupon available to investors, ended August 28 at just under 8.9%, after it declined to 9.29% in July. The firm also estimated the coupon was about 13% lower than at the same point a year earlier. Artemis reported that returns varied by currency, with total returns in the cat bond market ranging from 8.9% in USD, to 7.6% in EUR, and 5.0% in CHF. Plenum also cited a year-over-year move in the risk spread, saying it stood at 5.05% at the end of August, down from 6.07% a year earlier. Plenum noted that the risk free return on collateral has also eased to roughly 3.81% from about 4.15% a year ago, while the expected loss has risen to 2.50% from 2.24%. The article links the softer cat bond dynamics to trends in global property catastrophe reinsurance.