Secondary trading

Secondary cat bond pricing, as measured by the Swiss Re Global Cat Bond Performance Price Return Index, took a small 0.2 percent dip in June after dropping 1 percent during April and May

A "seismic shift" following the $1.5bn Everglades Re issuance led the Swiss Re Global Cat Bond Performance Price Return index down 0.7 percent during May, continuing several months of seasonal price tightening.

The $1.5bn Everglades Re issuance has helped soak up investor demand for Florida hurricane risk and put pressure on secondary market pricing for such bonds, Trading Risk understands.

The largest price rises on the secondary cat bond market have been seen at both the very low and very high risk ends of the ILS spectrum over the past month, traders told Trading Risk.

US broker-dealer regulator the Financial Industry Regulatory Authority (Finra) is planning to disseminate pricing and volume information on catastrophe bond trades completed by its members from the end of June.

The flurry of primary cat bond issuance over the past month has sparked secondary trading interest around some of the new bonds, as some ILS traders questioned whether the market is reaching a floor.

An influx of new capital into the ILS market at the start of the year caused cat bond spreads to tighten and bond prices to climb yet higher on the secondary market, according to the Aon Benfield ILS trading team.

ILS traders have predicted that secondary trading volumes will reach $3bn-$3.5bn in 2013.

The secondary cat bond market has seen relatively active trading levels over the past month, with ILS investors looking to trade short-dated bonds that come off risk this month, Trading Risk understands.

Listed ILS fund DCG Iris reported an active month for cat bond trading in June as it moved out of several positions in order to lock in mark-to-market profits, according to its latest monthly report

The robust pipeline of new cat bonds issued in 2013 led to high levels of trading on the secondary market during July, with some light trading continuing in the typically quiet month of August, sources said

Outstanding cat bond volumes reached $17.1bn by the end of June 2013, just nudging out the previous record high of $17bn set in 2007, according to Swiss Re's latest update on the ILS market.