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One Bond Market Is Defying the Global Selloff With Record Returns
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. It’s a dynamic that’s caught the attention of a growing number of ... (full story)