Cat bond market yield stable at 10.43%, as seasonality and demand compete in March

The opposing forces of seasonality and demand continued to drive the overall yield of the catastrophe bond market sideways through March, ending the month at 10.43% so remaining relatively flat over the period, according to the latest data from Plenum Investments.

Recall that, back in late 2024, high-demand for catastrophe bond investments had compressed risk spreads somewhat in the sector, resulting in the overall yield of the catastrophe bond market falling back into single digits at 9.94% by the end of December 2024.

The impactful California wildfires in January caused price adjustments in the catastrophe bond market, lifting the overall market yield that month back into double-digit territory, at 10.34% in USD.

Then, February saw opposing or competing forces taking hold, with the cat bond market yield settling at 10.44% in USD at the end of that month.

Those competing forces, of hurricane seasonality price effects, as well as continued strong demand for cat bonds driving prices higher, remained evident in March 2025, resulting in the end of month cat bond market yield of 10.43% in USD.

The 10.43% catastrophe bond market yield as of the end of March 2025, driven by its components of a 6.13% insurance risk spread and rounding to 4.30% collateral yield remains at historically attractive levels for investors,

As we’ve said before, against other fixed income alternatives, catastrophe bonds as an asset class continue to deliver on relatively higher spreads, with the added benefit of the risk-free return on collateral as well.

Plenum Investments said, “The same dynamic as last month continues to steer the yield. That’s why, the market yield still doesn’t show a clear upward direction, as it is normally the case during this period. We continue to expect sideways movement.”

The cat bond market yield, or total coupon for the cat bond market, sits at 8.46% Euro hedged, or 6.31% CHF hedged, according to Plenum’s data.

While there have been continued price movements for some wildfire exposed aggregate cat bonds in March, these haven’t had a meaningful effect on the overall yield of the market given the influence of the opposing price forces during the month, it seems.

Analyse catastrophe bond market yields over time using this chart.