From Artemis:
The secondary market price for the tranche of the World Bank’s pandemic catastrophe bond that is most at-risk of paying out due to the spreading global coronavirus outbreak has plummeted, while the lower risk tranche has now also been marked down.
As we explained last week, secondary market pricing for the World Bank’s pandemic catastrophe bond notes were expected to decline after the coronavirus outbreak spread resulted in a second triggering condition being met.
On cue, the highest risk layer of notes is now marked down significantly, with some secondary marks on pricing sheets we’ve seen seeking bids as low as 5 cents on the dollar for the notes, a roughly 95% mark down and a significant drop from the 45 to 55 cents average bid of last week.
Which suggests the market is anticipating an almost full draw-down of the protection from this tranche, which based on the rising case numbers, spread and confirmed deaths in a number of countries, seems an increasing possibility.....MORE
The novel coronavirus (2019-nCoV or Covid-19) outbreak that began in the Chinese city of Wuhan, Hubei province now poses a significant threat to the World Bank’s $320 million IBRD CAR 111-112 pandemic cat bond transaction.
The pandemic cat bond provides a source of insurance, or reinsurance like, capital to back the Pandemic Emergency Financing Facility (PEF).
With the coronavirus outbreak looking set to become an eligible event, under the terms of the World Bank’s pandemic cat bond notes, the increasing severity of the situation has ramped up the secondary market pricing pressure and the market is moving towards an expectation that the higher risk $95 million Class B tranche of pandemic bond notes will face a total loss of principal....
