Case Shiller Futures -Post #’s MTD

The futures market reacted quietly to Tuesday’s release of the January Case Shiller indices.  Prices edged higher in most contracts (with the exception of BOS and CHI).  Offers rose faster than bids (particularly in MIA and SFR) leading to slightly wider bid/ask spreads.  There were four trades yesterday (CHI, SFR and WDC).   MTD price changes for the CUS (10-city index) contract are posted below and a table of price changes for all contracts has MAr 25 CUSbeen posted to the Reports section (on one can click here).

The CUS table reflects a couple of price themes in the underlying regional contracts.  May ’14 (K14) contract prices tightened as months to expiration dropped from 3 to 2, and longer dated contracts (using Nov ’16 as an example) inched higher.

Not shown here (see Reports section) there were strong moves in the front SFR contracts (+5.4 points on the month) and WDC (+> 2 points).  By contrast bids in some of the front BOS and CHI contracts were down 2-3 points (raising the whole issue of whether winter storms had a temporary impact on home prices in these northern regions).

While bid/ask spreads tightened for the K14 and X16 expirations listed above, they widened in the off-cycle expirations.  In fact wider spreads in the two August contracts (Q14, Q15) contributed to more than 100% of all of the MTD aggregate bid/ask spread widening.   My sense is that most of that spread widening in the August contracts was traders just being cautious before CS #’s.  If August spreads can get back to Feb 28 levels (before Friday’s month-end marks), then aggregate bid/ask spreads will have tightened in March.  That will make the ~5th month in a row of tighter spreads.

Spread tightening has not been limited to the contracts with highest open interest.  I track which regions have the two tightest bid/ask spreads and for the first time in recent memory seven different regional contracts have at least one expiration on that list.  Those contract spreads include (BOSQ15, CHIK14 0.2, CUSX16 3.0, LAVX14 2.6, LAXX16 3.0, NYMG15 3.8 and SFRK15 2.2).  So there are relatively tight spreads across multiple regions and multiple expirations.  (MIA, SDG and WDC need help if anyone wants to “adopt” a contract).

I’m happy to discuss, help you tout, any contract.  Please feel free to contact me at to discuss these markets, or any spread trades.