Tuesday 5 September 2017

Could CAT bond yields reset into next year

I wonder how the CAT bond funds will do this year. 

Most of them had been running at about a 4-4.5% gross spread. Florida hurricanes are often the no. 1 risk and Texas hurricanes often in top 5. 

Would just need a Japanese or Californian payout or another hurricane to travel up the east coast to round the year off and perhaps reset premiums back to attractive levels for next year.

The space is interesting as it offers a reasonably liquid credit spread but is economically insensitive. Spreads normally reset wider after big payout years and its been several years since there was a big payout. 

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