Here’s an update of quotes across the CME Case Shiller home price futures contracts from early April 16th. I’ve posted as there’s been quite a bit of bid/ask spread compression since March 29th both by regions and across the expirations. For example CHI bids are 6.4 points higher, while offers are 7.4 points lower, for a net improvement of 13.4 points (when aggregated across all expirations). So, for ten Chicago expirations with two-sided markets, that works out to tighter spreads by ~1.3 points per contract. Other regions, such as BOS, LAV and LAX also show similar spread tightening.
Four of the five mid-expiration contracts (i.e. May 2019- Nov 2020) have also seen bid/ask spreads tighten by more than 10 points (again, when tallied across expirations with two-sided markets). For both regional and expirations, spread tightening seems to be a function more of offers falling than bids rising.
Finally, not shown in detail, the limited amount of higher bids is concentrated in longer-dated maturities (from May 2019 on), which has had the impact of increasing slightly, the depressed implied forward HPA (annualized home price appreciation changes).
Feel free to contact me (johnhdolan@homepricefutures.com) to discuss this blog, or any other aspect of hedging home price indices.
Thanks, John