Recap of Activity for June in CME Case Shiller futures

I've posted a recap of activity in the CME Case Shiller home price futures contracts is the Resources section or you can access here.

Key themes from the report include:

-Contract prices rallied in June to complete a more than 100% reversal of the Mar/April selloff, for the front contract (Aug '20/Q20). Prices on the Nov '20 and Feb '21 contracts compressed to small discounts from Aug, but the Feb '21 contracts are still at a discount to spot, and below levels seen in Feb '20.

–Activity for May included 22 lots traded, across only 2 expirations (!), and 6 regions.  All but one trade was in Q20. Trading volume but limited increase in OI suggestive of round trips.

–I continue to focus on Feb '21 and Feb '23 contracts as benchmarks. (see price indications page here). Bid/Ask spreads have compressed, mostly on bids rising while offers are only marginally higher.  My sense is that bid/ask have room to compress further as many intermediate/long regional quotes are a function of intercity spread quotes (i.e. few outright orders).

–Unusually, all trading took place before June 12th -with no trades around release of Case Shiller #'s. Since then, third-party activity has been very slow.

I continue to receive inquiries from readers looking to buy volatility (either in the form of puts or calls. Please contact me if you have interest on either side of an HCI (10-city index) options trade.

Inquiries on hedging cities not referenced by CME contracts has been thin even as Relative Performance Agreements on many other cities would clear with those cities priced above the HCI-10 city contracts. Anyone looking to add/reduce exposure to top 40 cities -either outright or relative to CS 10-city index - should contact me.

Please feel free to contact me if you have any questions on this blog, or any aspect of using home price index derivatives in hedging strategies.

Thanks, John