I’ve posted a month-end recap of issues related to trading in the Case Shiller (home price index) Futures to the Reports section (or you can link here). The report has many of the usual data, graphs and tables, on trading, open interest and prices, but as there was not a complete set of bids and offers at month-end, some of the graphs (from prior months) are missing.
The graph to the right tells most of the story for the last year. Prices (as measured by mid-markets) continue to move higher. While back-month price moves are consistent with a change from 3 to ~4% HPA, it is the move in the front contracts that has contributed to the recent upward shift in the curves. Aug ’13 (Q13) and Nov ’13 (X13) quotes reflect a further significant jump in index values (most likely based on the time of year (seasonal factors) and recent change in sentiment.) Expect Wall Street forecasters to raise their 2013 predictions if the Feb ’14 contract prices are reflective of expectations.
I would note that I’ve added a purple line to this graph that represents closes. I included it to show how, in a strongly rising, thinly traded market, closes are often just the best bid. (The same phenomenon held true as the markets sold off in 2008-09 where recent offers often defined closes.) As such, you may see bids inching higher to (among other things) bring closes more in line with mids.
Another casualty of trending markets is that bid/ask spreads tend to widen (or the offers disappear), and trading slips to near zero. That has recently been the case here.
I’ll have more to say on that, and other issues in the report in future blogs. For now, I just wanted to get this out ASAP.
Feel free to forward a link to this blog (or the Report) to others studying the contracts. As before, anyone is welcome to contact me (johnhdolan