Bonds
One Bond Market Is Defying the Global Selloff With Record Returns
- Catastrophe bonds soar to the top of global debt markets
- GAM, Schroders among asset managers that are piling in
Pine Island Road and destroyed houses in the aftermath of Hurricane Ian in Matlacha, Florida.
Photographer: Ricardo Arduengo/AFP/Getty ImagesThis article is for subscribers only.
As bond markets everywhere get battered by a cocktail of higher interest rates, deficit angst and hawkish central bankers, one class of debt instrument is handing creditors double-digit returns: catastrophe bonds.
Investors in the $40 billion market for so-called cat bonds have literally been sitting out the storm to reap returns as high as 16% this year. Because of the way the bonds are structured, their coupons keep going up as Treasury yields rise, and investors get a sizable risk premium on their capital, as long as catastrophe doesn’t hit.