Secondary trading

An abundant supply of cat bonds for sale on the secondary market pushed pricing to a 12 month low this month.

The secondary ILS market had a strong trading quarter in the fourth quarter of 2011, buoyed by strong new issuance on the primary market, broker Aon Benfield Securities says in its latest market review.

The Swiss Re global cat bond price return index has gradually been shedding value over the final quarter of 2011 to start 2012 at a similar level to that recorded after the March earthquake in Japan

Two natural catastrophe bonds closed at the end of December at hefty spreads to take 2011 issuance to $4.7bn, according to Trading Risk calculations

Investment bank UBS has closed its New York cat bond desk, Trading Risk understands.

Traders at Goldman Sachs and Swiss Re are the only broker-dealers authorised to trade cat bonds for their own account, according to a Trading Risk survey.

As a large number of 2009 vintage cat bonds roll-off over the next six months, investors are on the hunt for remaining yield in the transactions now that the US wind season is over.

Investors may be preparing to contest a decision that at a stroke added more than $100mn to the loss tally for the Mariah Re tornado bonds, wiping out the higher-lying $100mn issuance, Trading Risk can reveal.

Trading platform ICE is continuing to list seven Ifex event-linked futures contracts after de-listing a group of the products earlier this year

ILS funds and traders must create their own transparency in the cat bond market by actively working with broker-dealers to get a sense of the market price, according to Elementum Advisors founding partner John DeCaro

Prices in the secondary trading market are being depressed by a flurry of keenly priced new cat bonds in the fourth quarter and an element of seasonality as the US wind season closes

Pricing on American Family Mutual's Mariah Re 2010-1 cat bond increased slightly on news that the notes were to suffer an $11.6mn loss