Asset managers tend to roll their futures positions early to avoid the complexities of the physical delivery period. This concentrated activity creates predictable market pressure. In sectors where these managers are net long, their early rolling can exert a bearish influence on calendar spreads.
Related Insights
While funding rates are the main driver for many Eurex futures rolls, the Bund and Shats calendar spreads are different. Their performance is primarily determined by the evolution of the cheapest-to-deliver (CTD) yield curve and relative value dynamics, making them directional to yields.
Unlike digital assets, perpetual futures are fundamentally incompatible with markets for physical goods like livestock or grain. The model breaks down because a contract that never expires cannot accommodate the essential mechanism of making or taking physical delivery, a core function of these traditional futures markets.
Unlike typical investors who chase performance, sophisticated institutions often rebalance into managed futures when the strategy is in a drawdown. They take profits after strong years (like 2022) and re-allocate capital during weak periods to maintain strategic exposure.
A significant divergence exists in agricultural markets: the FAO Food Price Index shows physical prices at their strongest since 2022, yet futures-based indices are down over 4%. This gap is driven by short investor positioning and suggests a major tension between real-world supply tightness and speculative trading.
Programmed strategies from systematic funds, which delever when volatility (VIX) rises and relever when it falls, are the primary drivers of short-term market action. These automated flows, along with pension rebalancing, have more impact than traditional earnings or economic data, especially in low-liquidity holiday periods.
German swap spread movements are being driven more by technical factors than macro fundamentals. A primary driver is the unwinding of long-end interest rate hedges by Dutch pension funds. This flow is causing significant steepening in the 10-30 year swap curve and is expected to continue.
Contrary to classic theory, markets may be growing less efficient. This is driven not only by passive indexing but also by a structural shift in active management towards short-term, quantitative strategies that prioritize immediate price movements over long-term fundamental value.
Unlike in the US where CFTC data is available, J.P. Morgan's European analysts use a proprietary methodology to estimate investor positioning. They reconstruct positions by analyzing changes in open interest and prices, allowing them to infer market sentiment for Eurex futures.
In markets dominated by passive funds with low float, retail investors can create significant volatility by piling into call options in specific sectors. This collective action creates "synthetic gamma squeezes" as dealers hedge their positions, making positioning more important than fundamentals for short-term price moves.
Contrary to expectations, drawdowns in managed futures frequently occur when equity markets are performing well. The strategy's recovery periods, however, often coincide with equity market turbulence, highlighting its counter-cyclical nature and making it behaviorally difficult to hold.