Investors seeking high yields are flocking to catastrophe bonds, spurring insurance companies to issue them at the highest rate since the 2008-09 financial crisis.
Catastrophe bond issuance soared more than 100 percent in the first quarter from a year earlier, to $1.2 billion, according to Willis Capital Markets & Advisory,
The Wall Street Journal reports. Willis expects second-quarter issuance to reach a record peak of more than $3.5 billion.
Money from the bonds can help pay for claims related to catastrophes such as hurricanes, tornadoes and earthquakes.
Editor’s Note: Get These 4 Stocks Before 399% Stock Market Rally!
Catastrophe bond holders have rarely suffered losses historically. But investors can lose both interest payments and their principal if the costs of disasters top a preset level, which allows insurers to spend the money, The Journal reports.
The bonds carry floating interest rates and usually have a maturity of three or four years.
"Institutions of smaller and smaller size are becoming interested in the market," Brett Houghton, a managing principal at Fermat Capital Management, a long-standing specialist in catastrophe bonds, tells The Journal.
Investors' strong demand has pushed the bonds' yields to nine-year lows, according to The Journal. The average quarterly yield has slid to 5.22 percent from 9.61 percent two years ago. That compares with 1.71 percent for a five-year Treasury note Friday morning.
As for Treasurys, they have been range-bound in recent weeks, as investors try to discern how Federal Reserve policy will evolve.
Confusion about that policy is "where the market really struggles," Sean Murphy, a Treasurys trader at Societe Generale, tells
Bloomberg.
"It's been a bit of a battle" between market views, as dovish comments from Fed Chair Janet Yellen contrast with policymakers "showing no signs of slowing down tapering," he notes.
Editor’s Note: Get These 4 Stocks Before 399% Stock Market Rally!
© 2026 Newsmax Finance. All rights reserved.