June 2025
Fixed Income Monthly Report
Chris Edmonds
President, Fixed Income & Data Services, ICE
Rethinking risk in the municipal bond and housing market
Plans announced by the Trump administration to restructure the Federal Emergency Management Agency – which is today part of the Department of Homeland Security – may significantly impact local debt markets. Specifically, municipal bond and housing market participants could face changes in the risk profile of their investments, with the potential shutdown of FEMA after hurricane season. Whatever form disaster relief takes - whether from a dedicated agency, federal funding, or a combination - change is likely. It could be a watershed moment for municipal bond and housing investors, who would need to consider questions about risk:
- The impact on issuer credit profiles. What new stress-testing approaches should be applied to reveal pockets of hidden default risk?
- Identifying emerging risk concentrations. If climate events continue to intensify and private insurers retreat from high-hazard regions, how will investors monitor these shifts?
- Insurance costs around climate risk. Rising insurance costs and decreased coverage could be magnified if federal disaster support changes, with consequences for housing affordability, and municipal and mortgage-security pricing.
- Alternative data sources to quantify climate risks. If FEMA’s National Risk Index and standardized physical-risk metrics that municipalities and insurers have relied on are discontinued, investors will need alternate sources to assess flood, hurricane and wildfire risk.
Many view FEMA as a financial backstop in the aftermath of natural disasters, helping to stabilize the municipal bond market by reinforcing investor confidence that governments would support recovery.
ICE’s physical risk projections identify over $19 billion in outstanding municipal debt tied to high physical risk and low credit ratings (BBB+ or below) concentrated in Florida, Texas, Louisiana, and Alabama. These issuers may face higher default risk if agency support changes, as climate-related disasters become more frequent and severe.
High Climate Risk and Low Credit Rating Outstanding Debt
Total outstanding municipal bond debt by state with a credit rating or BBB+ or below (not including unrated securities) and an ICE Physical Climate Risk Score greater than or equal to 3. ICE Climate Risk Scores range from 0-5, where a higher rating corresponds to greater risk of physical climate hazards. Source: ICE as of June 12, 2025.
The housing market could also be impacted. FEMA’s National Flood Insurance Program covers over 4.5 million policyholders, and federally backed mortgages in flood zones require this insurance. A scenario without these mechanisms may increase financial vulnerability in high-risk areas and reduce property values, reducing the tax base that supports municipal bonds.
The influence of property insurance costs and coverage on the housing market could also be magnified. Insurers are already withdrawing from states with substantial climate risks and any reduction in federal agency coverage could intensify this dynamic.
The potential loss of FEMA’s National Risk Index would create a significant data gap. This tool provides free, publicly accessible data on physical risk across the U.S. Investors and issuers would need to rely more heavily on private-sector data providers like ICE to fill this gap. ICE’s data provides unique visibility into municipal and housing sector risk through its climate, property and loan-level datasets - including analytics that help quantify modeled home price depreciation projected due to a specific type of hazard. For muni and housing markets, the need for rigorous risk assessment and high quality data has never been more urgent.
Visiting clients and colleagues in the Asia-Pacific
In early June I had the pleasure of connecting with ICE clients in Hong Kong to discuss the evolving needs of the Asia-Pacific market. These conversations reinforced how data and technology are playing an increasingly critical role in helping clients make smarter, faster decisions.
A special highlight was spending time with the ICE team in Hong Kong, and getting the opportunity to say farewell to Magnus Cattan, who is returning home to Scotland after 16 impactful years at ICE.
With Magnus’s departure, we’re excited to welcome Christy Chan as the new Head of Fixed Income and Data Services in APAC. Christy brings both deep regional expertise and a strong client-first mindset. I’m looking forward to seeing her leadership in action across the region.
Forecasting financial exposure to billion-dollar hurricanes
As the 2025 North Atlantic hurricane season gets underway, analysts at ICE Climate present their review of the 2024 U.S. hurricane season, revealing the material and actionable insights clients can extract from our climate datasets to help mitigate both immediate extreme weather hazards and climate risk over decades.
Three financial technologies redefining modern wealth management
Financial technology is revolutionizing wealth management in the front, middle and back office. In this article, ICE Wealth Management explains how comprehensive corporate actions data, continuous evaluated pricing and increasingly inexpensive market data terminals are making wealth advisors more efficient and cost-effective.
Institutional and retail trading converge in U.S. corporate bonds
Institutional trading of U.S. corporate bonds has traditionally been spread-based via request for quote. More recently, retail and wealth activity has surged as SMAs and ETFs have made corporate bond investment easier and on-screen price-based click-to-trade has taken off. Now, ICE Bonds is introducing spread-based click-to-trade, enabling institutions to execute corporate bonds on-screen, gaining more visibility into liquidity and preventing information leakage.
ICE First Look at mortgage performance: delinquencies steady in May but trend higher annually
Delinquencies and foreclosure activity continue to trend slightly higher on an annual basis according to ICE Mortgage Technology’s May 2025 ICE First Look report. Key takeaways include a fall in the national delinquency rate, down 2 basis points to 3.20% in May, though this rate is still up 5.2% year over year. Serious delinquencies – loans 90+ days past due but not in foreclosure – improved seasonally but are still up 56K (14%) from the same time last year.
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