Secondary cat bond trading surge suggests robust year-end repositioning: Loconte, Azimut

A notable surge in secondary catastrophe bond market trading in the final days of 2025 suggests a “robust year-end repositioning”, according to Azimut Switzerland SA’s Isacco Loconte, who highlighted a number of key trends seen when analysing the period of more elevated cat bond market liquidity.

Loconte, an ILS Investment Specialist at asset manager Azimut Switzerland SA, said that weekly secondary market trading volumes for cat bonds had been relatively subdued through most of the fourth-quarter of 2025.

Q4 cat bond trading volumes in the secondary market were averaging just $17.5 million of notional traded, but the market sprang to life in the final weeks, Loconte explained in a post on LinkedIn.

Analysing TRACE data for cat bond trades shows that there was “a significant breakout in the final weeks of December” resulting in “two massive trading sessions that stood out in an otherwise quiet quarter,” Loconte wrote.

He found, from the TRACE data on securities traded, that December 22nd 2025 saw $74 million in cat bond notional traded, while December 30th 2025 saw a further $41 million in traded volume, both well-above the average seen through Q4.

Of course, the end of the year was a particularly busy time for new catastrophe bond issuance with numerous new deals settling in the final weeks of the year. This supported the significant annual issuance record for the catastrophe bond market that we detail in our latest report.

But Loconte also highlights a number of interesting trends and market dynamics he spotted while analysing the cat bond trade data for the fourth-quarter of 2025.

Firstly, Loconte says that the vast majority of trades were in US hurricane exposed cat bond names, which he sees as a strategic positioning among cat bond fund managers and investors.

“This is a tactical move as the market enters the 6-month “off-risk” phase for this peril, allowing investors to optimize portfolios during the seasonal lull,” Loconte explained.

Secondly, there was a clear focus on trading of short-dated cat bonds, those nearing maturity.

Loconte wrote, “Week 50 was a unique outlier where nearly half of the volume was focused on “Dead Cats” (bonds nearing immediate maturity). Aside from this specific window of “housekeeping,” the rest of the quarter remained firmly focused on long-dated bonds.”

Finally, Loconte also believes trading was relatively concentrated among issuers in the last few weeks of 2025.

He explained, “While the activity was high, it was remarkably concentrated. The 179 Cat Bonds traded over the last 4 weeks represent various classes and tranches from only 66 unique issuers. This highlights a selective market where liquidity is currently pooling around a specific subset of the universe.”

Loconte summarised his findings from the end-of-year secondary catastrophe bond trading activity by writing, “This surge suggests a robust year-end repositioning, with investors balancing short-term liquidity needs against long-term conviction in core names.”

The ability to trade catastrophe bonds in the secondary market remains a highly valuable function for investors and ILS managers, enabling positioning to be adjusted and optimised, which can be particularly helpful when the issuance pipeline is heavy, or as cat bond holders are setting themselves up for seasonal changes.