CME reaction to today's Case Shiller #'s

The Case Shiller numbers released today were stronger than the expiring May '19 CME Case Shiller home price index contracts had suggested. Five regions produced "surprises" -which I define as a result outside the bid/ask spread of the expiring contract on the last day of trading. See May 24th blog for discussion of convergence.

The table below repeats Friday's CME prices for the May '19 contracts and I've added the Case Shiller # released this morning at the bottom. In four regions (BOS,DEN, SDG and SFR, highlighted in green) the CS index is above the offered side of the contract price from last week. That means that someone who could predict the Case Shiller #'s in advance could have bought contracts on Friday and made $250 *( index minus offered price) per contract. Only one region (LAV -highlighted in red) was lower than the bid side of last week's markets.

(Two nits: 1) The size of the "surprise" for the SFR index is the largest I can recall in years, and 2) both the LAX and NYM indices for the prior reporting period were revised lower by 0.33 and 0.23 points)

Given these "surprises", CME Case Shiller futures prices on longer-dated contracts are higher through noon today in 9 of the 11 regions. The table below shows quotes for the Nov '20 (X20) contracts from Friday versus earlier this morning. The only contract where the mid-market values declined was the LAV contract. Both the SDG and SFRX20 contracts saw gains in the mid-market value of > 2.0 points.

Bid/ask spreads have remained about the same, and there have been no trades, or third-party quotes inside the levels I've posted.

Please feel free to contact me if you have any questions about this blog, or any aspect of hedging home price indices.

Thanks, John