Definition & Meaning | English word BACKWARDATION

Definitions of BACKWARDATION

1. In full normal backwardation: the situation in a futures market where the price for future delivery of a commodity (the forward price) is lower than the price for immediate delivery (the spot price) or nearer delivery, generally arising from a near-term shortage of the commodity.
2. The situation in a stock market where the offer price for stock is lower than the bid price.
3. (obsolete) In the London Stock Exchange: a fee paid by a seller on settlement day either to the buyer or to a third party who lends stock, when the seller wishes to defer settlement until the next settlement day.
4. A situation in which short-term interest rates are higher than long-term interest rates.

Examples of Using BACKWARDATION in a Sentence

• Normal backwardation, also sometimes called backwardation, is the market condition where the price of a commodity's forward or futures contract is trading below the expected spot price at contract maturity.
• The DBLCI-OY indices are designed to select the futures contacts that either maximise the positive roll yield in backwardation term structures or minimise the negative roll yield in contangoed markets from the list of tradeable futures that expire in the next 13 months.

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