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Has anyone else noticed that stock index futures fell into backwardation just after the Lehman crisis?
Well, we for one couldn’t find any commentary on it.
Accordingly we present the time-spreads for the FTSE, the DJIA, the S&P 500, the Nikkei, and the DAX.
First the FTSE basis (the difference between the index and the front month future):
And now the difference between the front contract and the third (an even more telling trend):
Now the DJIA basis on a much longer time frame:
And the Dow time spread (which neatly reflects the changing cost of carry in the period, but fails to explain the deepening negative basis from 2009 onwards — a period during which interest rates did not change):
Now the S&P 500 basis and the time spread side-by-side (on an even longer time frame):
And lastly, the Nikkei futures time-spread, which seems to show up that lost decade rather tellingly:
And here’s the Nikkei basis:
But, fear not, there are still positive relationships out there — the DAX time spreads, for example, are still positive:
Although the basis itself seems to be creeping into negative territory:
Related links: S&P 500 futures market and the normal backwardation hypothesis – Mahamood Hassan Causality in Futures Markets – AREC
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