I've posted a recap of activity in the CME Case Shiller home price index futures for October. The recap can be found on the Resources page of my website or one can link here.
Key points covered include:
–During October 8 lots traded across 3 regions and 2 expirations. (All of the trading was in either the X21 or G22 contracts).
–Prices slipped for the first time in many months. Bids were hit, and third-party offers (and inquiries to sell) were much more frequent. One aspect of my pricing is that the bullishness that had been priced into stronger markets (e.g. BOS, SDG) was no longer justified after this month's CS #'s. In addition, I was pushing bids to find reactions (e.g. price discovery). In running into sellers, I was able to convert that into tighter bid/ask spreads.
–Bid/ask spreads tightened-mostly in the front (X21), and G23 contracts. Quotes on the G23 contracts (relative to G22) reflect reduced, but still 4-6% HPA for 2022.
–I continued my effort to re-price the G23 contracts, and some steepness (between G22/G23) emerged. (Note, for example, that the bid/ask spread for LAXG23 tightened from 17 points to 8.6, as the bid increased 2.4 points, and the offer is lower by 6.0 points.)
–Trading continues to be highly concentrated in the front contracts (X21 and G22), and so I’ve focused on making tighter markets there(and G23/G24), rather than having quotes in all contracts. Only recently, I’ve repriced calendar spreads (G22/G23) to prompt debate of 2022HPA. (The report will be updated Monday Nov 1)
–I’ve also focused on IC (intercity) spread quotes for Feb ‘22 to promote discussion of relative forward performance across regions. DEN, LAV, MIA, SDG and SFR are priced to outperform HCI, while CHI and WDC are priced to lag.(Again, to be updated Monday Nov 1)
–Please feel free to DM me on ideas for trades on any of the above, if you have questions about this blog, or just want to learn more about the use home price index derivatives in hedging, to johnhdolan@homepricefutures.com.
Thanks, John