Today’s Case Shiller numbers produced a number of surprises (as defined by falling outside the bid/ask range of the expiring Aug ’15 contract). Recall that since the CME futures cash-settle, in theory, market prices on the expiring contract should reflect consensus views on the numbers released the next day. In addition, since the measurement period covers April-June, unlike the S&P 500, none of the market noise over the last week impacted the index/closing price. ( In reality, I posted many of the quotes in an effort to drive bid/ask spreads into <=1 point to encourage trading.)
The following table shows index results (reflecting revisions in NYM and WDC), percent changes (1-,3-, and 12-months), the Aug ’15 quotes late on Monday, the actual index releases, and a color-coded analysis of whether the CS index results were surprises (again as defined above).
The regions in red say index results that were below the bid-side of the Q15 contracts, while those regions in green had index results that were above the offered side. Net of the 11 contracts, 3 saw index results that were higher than the last offer, and 5 say index results that were below the last bid.
This relatively high number of “surprises” reflects: a) that bid/ask spreads were tight, and b) that there appeared to be few other market participants quoting Aug ’15 contracts. As an anecdote related the second comment, I can’t recall the last quarterly expiration in which there was NO trading in a front month contract. That occurred this month.
The bottom portion of the table shows the Nov ’15 contract prices from yesterday vs. today. Here the impact of the stock market gyrations may have had some impact. Net, prices appear to be a wash (even with stocks up today) as there are 5 markets with higher mid-market levels as of this writing (around noon) with 6 that are lower.
Of more consequence, is that while Nov ’15 bid/ask spreads are about where they were on Monday (and on July 31), bid/ask spreads on longer-dated expirations have widened. I suspect that (eventual?) stability in the stock market will help bring bid/ask spreads in for the X16 and X17 contracts.
There have been no trades today, but there were two in the last few days – one in NYMX17 and another in CHIX15.
Finally, with the expiration of the Aug ’15 (Q15) contract, the CME has opened trading in the Feb ’17 (G17) contract. I suspect (as that’s my plan) that G17 will be quoted at a discount to X16 contracts. I hope that in having a Feb ’17 contract (recall that it settles using the Dec ’16 CS index values) we can start conversations (and trading?!?) about 2016 HPA based on Feb ’16/Feb ’17 calendar spreads.
As always, feel free to contact me (email@example.com) if you have any questions, feedback or commentary.