ES→SPX ≈ 3pts! Here comes the interest rates!

Nah, the majority of the basis variation comes from dividends dropping off. The effect of expected changes in rates is very minor.
Simple math - 1 point of SPX basis is about 4 bps. Dec FOMC is on 12th, say there are 10 days left from it to expiration. That would mean that a 1 pt change in basis implies an over a 100bp change in interest rate.
 
It is either caused by dividend or interest rate. I looked at the CME FOMC tool but I think nothing had really changed in rate hike probability?
 
sle said:
Nah, the majority of the basis variation comes from dividends dropping off. The effect of expected changes in rates is very minor.
Simple math - 1 point of SPX basis is about 4 bps. Dec FOMC is on 12th, say there are 10 days left from it to expiration. That would mean that a 1 pt change in basis implies an over a 100bp change in interest rate.
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While I agree whole-heartedly with the observation (especially as I had completely forgotten this sort-of effect :rolleyes: ), I am troubled by the fact that I've been watching ES→SPX for years and years, and have only recently seen the discount *increase* as the ES aged. (Recently being..... the last 6 months? maybe 9?? That would cover MAR/JUN/SEP..... +/- DEC.....) Every other ES expiry (as remembered) was a monotonic decline.

Funky. Thanks for the post, sle -- I'll be looking for more evidence (and keeping my ears open and eyes peeled) going forward.
 
And this morning, we're back to nearly 2.00 pts between 'em.

One month to go; still seems a bit low for the last decade, but about 'as expected' for the last 4Qs.
 
I ain't an expert, but I would agree with sle... Interest rates don't really make that much of a difference, while dividends do. Looking where the divvy futures are, it would seem that it's all fair.
 
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