JPMorgan-US Equity Financing and AIR TRF Monitor Oct 8, 2024-110699955

Global Quantitative & Derivatives Strategy08 October 2024J P M O R G A Nwww.jpmorganmarkets.comGlobal Quantitative and Derivatives StrategyBram Kaplan, CFA AC(1-212) 272-1215bram.kaplan@jpmorgan.comDaniel Motoc, CFA(1-212) 622-0105daniel.motoc@jpmchase.comJ.P. Morgan Securities LLC•Implied financing rates remain very rich given the strong demand for levered equity exposure and year-end balance sheet premium. S&P 500 financing spreads are in their 98-100th percentile (vs. the past 5Y of history) for all tenors that cross year-end (i.e., ≥3M). •S&P 500 implied financing rates saw mixed changes across the curve w/w, while short-dated implied financing rates declined on the Nasdaq 100 and Russell 2000, leading to a w/w steepening of the term structure.•S&P 500 AIR pricing increased 2 bps on the Dec’24 contract, and ~4-5 bps across the rest of the curve w/w.•Volumes on S&P 500 AIR TRFs totaled ~$25.2Bn (1.7z) over the last week, with the bulk of trading on the Dec’24, Mar’25, Jun’25, and Dec’25 contracts.•Open interest on the S&P 500 AIR TRFs decreased $2.2Bn w/w.•~$40Mn notional traded on the Dec’24 Nasdaq 100 AIR TRFs, and ~$1Mn on the Dec’24 Russell 2000 AIR TRFs over the past week.Figure 1: S&P 500 Implied Funding Rate HistorySpread vs. SOFR, annualized-0.1%0.0%0.1%0.2%0.3%0.4%0.5%0.6%0.7%0.8%0.9%Oct'21Oct'22Oct'23Oct'24SPX 3M IFRSPX 1Y IFRSPX 5Y IFRSource: J.P. Morgan Equity Derivatives StrategySee page 5 for analyst certification and important disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.US Equity Financing and AIR TRF MonitorOct 8, 20242Bram Kaplan, CFA AC(1-212) 272-1215bram.kaplan@jpmorgan.comGlobal Quantitative & Derivatives Strategy08 October 2024J P M O R G A NAIR TRF MonitorFigure 2: S&P 500 AIR TRFsExpiryBidAsk1w Chg (mid)4w Chg (mid)OI ($Bn)Chg w/wADV 1m ($Mn)ADV 1w ($Mn)Dec'2470762-645.6-3.12,1002,576Mar'2581863.5-116.90.29671,098Jun'2580844.5-12.80.3412429Dec'2578823.53.522.0-0.5303512Dec'2680854418.90.0235114Dec'2782874412.1-0.21611Dec'288590559.00.03718All**156.1-2.24,5255,032Pricing*Activity MonitorSource: J.P. Morgan Equity Derivatives Strategy. *Quoted as spread to EFFR (bps) **Calculated across entire futures chainFigure 3: Forward Starting Spreads (Mids)ExpiryDec'24Mar'25Jun'25Dec'25Dec'26Dec'27Dec'24Mar'2510.5Jun'259-1.5Dec'257-3.5-2Dec'269.5-10.52.5Dec'2711.512.54.52Dec'2814.545.57.553Forward Starting Spreads (Mids)Source: J.P. Morgan Equity Derivatives StrategyFigure 4: AIR TRF Open Interest History by Index05001,0001,5002,0002,5003,0003,5004,0004,500020,00040,00060,00080,000100,000120,000140,000160,000180,000200,000Jan'21Jul'21Jan'22Jul'22Jan'23Jul'23Jan'24Jul'24S&P 500 (LHS)Nasdaq (RHS)Russell 2000 (RHS)Open Int ($Mn)Open Int ($Mn)Source