The MSCI EM roll is trading cheap to fair value and cheaper than its averageroll cost over the past 3 years, but richer than last quarter. However, the roll hasbarely started to trade and may have a significant price adjustment to a clearinglevel once it becomes more active this week. The EM roll generally cheapenedinto expiry the past 4 quarters, often exhibiting opposite trends to the other USlistedcontracts. Nothing we’re seeing suggests this cheapening streak is aboutto break. Positioning in EM futures appears to have slightly deteriorated thisquarter, so we believe the roll is likely to cheapen into expiry again (once itfinds a tradable level) and recommend rolling longs late/shorts early.

The MSCI EAFE roll is indicated rich to fair value; however, it effectivelyhasn’t started to trade (<100 roll spread contracts have traded cumulativelythrough the end of last week), bid/offer is wide, and open interest on theSeptember futures is close to zero, so there will likely be a sizable priceadjustment to a tradable level once the roll spread begins actively trading laterthis week (as has occurred frequently in the past). Last quarter, the EAFE rollwas relatively well-behaved again, mostly trading within a narrow price band.Investor positioning in international DM equities appears little changed vs. lastquarter, so we anticipate a roughly neutral trend for the EAFE roll again thisquarter (once a tradable level is established), and recommend largely rolling inlinewith liquidity.