Cat bond issuance price pressure flattens market yield, widening less pronounced: Plenum

Catastrophe bond market yields remained flatter than anticipated through February as expected seasonal spread widening proved less pronounced given the continued price pressure from new primary cat bond issuance that is coming to market at lower premiums, data from Plenum Investments shows.

The overall yield of the catastrophe bond market ended February 2026 at 8.91%, as cat bond risk spreads moved higher slightly during the month.

But that is only marginally higher than the end of January figure of 8.87%, while more typically a stronger increase might have been expected given expected season trends for spreads to become more consistent in widening out at this time of year.

Spread widening trends returned to the catastrophe bond market after the hurricane season ended, but since the start of December the overall yield of the cat bond market has only risen by 0.11%, with only 0.08% of that move being attributable to wider spreads.

The same dynamic that muted spread widening through January has also been in effect through February 2026 it seems, with continued high investor demand in the cat bond marketplace driving price pressures.

“Seasonal spread widening is visible,” specialist catastrophe bond manager Plenum Investments explained, “though less pronounced than anticipated.”

The investment manager said that this remains “due to ongoing price pressure from primary market transactions issued at lower premiums.”

The strong execution and lower pricing in primary cat bond issuance, which some suggest is down around 30% over the last couple of years, is having a knock-on effect in the secondary market values of outstanding cat bonds and muting the expected seasonal widening effect we’d more typically see.

Of course, this has happened before, where market dynamics or external factors mute, or even accentuate, the expected spread development trends in catastrophe bonds. The market will naturally catch up, but it does also reflect investor sentiment, appetite and capital levels being priced in which can make trends less predictable.

The insurance risk spread, or discount margin, of the catastrophe bond market had declined to as low as 4.88% at November 28th 2025, on the back of seasonal spread tightening.

It had risen 6% to reach 5.17% by December 26th 2025, but then in January 2026 only managed a rise to end the month at 5.21% and has now risen only slightly further to 5.25% by February 27th (the latest date for which data is available currently).

The risk-free return on collateral fluctuated through February but ended the 27th of the month flat with the end of January, at 3.66%.

The expected loss of the cat bond market, as measured using Plenum Investment’s methodology, only rose 0.01% to 2.35% through February.

As a result, the yield including the risk free rate over expected loss of the cat bond market rose slightly from 6.53% as of January 30th 2026 to reach February 27th at 6.56%.

It’s a further signal that the market perhaps remains a little unbalanced, in terms of supply of capital and investor interest versus supply of new issues, which also suggests that new cat bond issuances coming to market can continue to expect to benefit from strong investor appetite and keen pricing.

Analyse catastrophe bond market yields over time using this chart.