The overall yield of the catastrophe bond market increased to above the 11% mark in June 2025, the first time it has surpassed that level since October 2024, but with the hurricane season now underway the expectation is for the discount margin to decrease, according to cat bond fund manager Plenum Investments.
Catastrophe bond market yields reached 11.12% at the middle of June 2025, but declined slightly towards the end of the month, to 11.03% as of June 27th.
Notably and indicative of softer pricing conditions in the catastrophe bond market, as well as lower risk-free collateral returns, the overall yield of the cat bond sector now stands some 19% lower than it was a year ago (13.69% at June 28th 2024).
Both the insurance risk spread, or discount margin, and the collateral yield of the catastrophe bond market are down since that time.
The insurance risk spread stood as high as 8.33% a year ago, while the collateral yield was 5.36%.
As of June 27th 2025, the risk spread of the cat bond market stood at 6.73%, while the collateral yield was 4.3%.
You can analyse the yield of the catastrophe bond market over time in our interactive chart, which uses data kindly shared by Plenum Investments.
Going forwards, typical seasonality through the Atlantic hurricane season is expected to compress insurance risk spreads, reducing the discount margin.
Plenum Investments explained, “The total yield in the CAT bond market varies between 11.3% (previous month: 10.9%) in USD and 6.6% (previous month: 6.5%) in CHF. The last week of June, however, gave us the first hint at the start of the spread tightening regime, typically seen during the hurricane season.
“This decrease in market dm will continue throughout the hurricane season.”
It’s worth noting that while the overall yield of the catastrophe bond market is down on a year ago, risk spreads remain attractive and the expected loss of the cat bond market is only slightly higher and still lower than EL’s were back as recently as early 2023.
Analyse catastrophe bond market yields over time using this chart.
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