Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

More downward movement in secondary cat bond trade prices


Many of the secondary market catastrophe bond trades recorded by FINRA’s TRACE system in the last week have again been at lower price levels. Meanwhile the focus on short-dated bonds continued, with a number changing hands.

It’s important to note that the trades recorded by FINRA are only those transacted across U.S. trading desks where the data has been submitted to TRACE, so this does not reflect full secondary market activity for the asset class.

However it does provide an insight into what investors are doing in terms of portfolio management currently and which bonds are attractive to acquire for some fund managers.

Once again yields are clearly one driver, as all eight of the cat bond trades recorded at TRACE in the last week have a coupon of above 5%, with five of them coming in at 8%+. Investors are still showing a need to acquire these higher yielding notes in order to boost returns, even if the term to maturity is particularly short.

The other trend that continues to be apparent is the price coming down on many positions. It’s natural that the short dated bonds should see trade prices reduce slightly as they near maturity, but the trend has been evident with almost every trade. The market continues to display some uncertainty over where prices go next and also a desire to see some more stability in premiums.

Here is a list of the catastrophe bonds that traded last week, where data is available from FINRA’s TRACE system, their most recent prices and where they traded previously:

East Lane Re IV Ltd. (Series 2011-1) Class B notes – Traded at 100.4 on 4th Feb, down from 100.77 on 7th Jan. Coupon 6.665%. Matures 13th March 2015.

Foundation Re III Ltd. (Series 2011-1) – Traded at 100.1 on 4th Feb, down from 100.41 on 7th Jan. Coupon 5.03%. Matures 25th Feb 2015.

MultiCat Mexico Ltd. (Series 2012-1) Class A – Traded at 102.5 on 2nd Feb, up from 102.25 on 19th Dec. Coupon 8.013%. Matures 4th Dec 2015.

Pelican Re Ltd. (Series 2012-1) – Traded at 102.09 on 5th Feb, down from 103.1 on 14th Jan. Coupon 13.785%. Matures 13th April 2015.

Queen Street IV Capital Ltd. – Traded at 100.5 on 4th Feb, down from 100.8 on 14th Jan. Coupon 7.505%. Matures 9th April 2015.

Queen Street V Re Ltd. – Traded at 101.68 on 6th Feb, up from 100.7 on 21st Jan. Coupon 8.505%. Matures 9th April 2015.

Residential Reinsurance 2011 Ltd. (Series 2011-1) Class 5 – Traded at 101.9 on 6th Feb, down from 102.45 on 8th Jan. Coupon 8.785%. Matures 6th Jun 2015.

Tar Heel Re Ltd. (Series 2013-1) – Traded at 104.7 on 3rd Feb, down from 105.2 on 28th Jan. Coupon 8.533%. Matures 9th May 2016.

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