While catastrophe bond yields have declined from the highs seen between 2022 and 2024, analysts at Morningstar DBRS expect demand for the asset class to remain strong. Saying that, despite recent yield compression, the market continues to offer equity-like returns that are largely uncorrelated to traditional stock and bond markets.
In a recently published report, Morningstar DBRS emphasises how forecasts from the National Oceanic and Atmospheric Administration (NOAA) for this year’s Atlantic hurricane season act as a short-term sentiment and pricing catalyst.
The agency notes that these forecasts can pressure near-term yields, particularly for bonds exposed to hurricane risk, but supply-demand factors remain more dominant in general.
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