 The US futures rolls are trading very rich to fair value given concerns around GSIB dynamics. The rolls are likely to be spot dependent: we could be one material positive Omicron headline away from a market rebound that increases balance sheet pressures by spurring futures demand, or rolls could cheapen in case of continued market weakness as positioning deteriorates further.

 We’re inclined to expect the US rolls (SPX, RTY, NDX) to cheapen overall into expiry, since: 1) the December contract is cheap and doesn’t indicate significant demand for the front-month contract that will need to be rolled to March, 2) the rolls are already very rich and could be pressured by supply from non-GSIB banks and buy-side investors, 3) positioning appears weaker than in September and last quarter the roll exhibited mixed trends, and 4) the recent selloff relieves some balance sheet pressure from banks. However, we wouldn’t recommend taking large active timing bets either way given a number of cross-currents that make it difficult to have a high-conviction view.

 The MSCI EM roll is likely to cheapen into expiry given weak positioning, while we expect a roughly neutral trend for the MSCI EAFE roll again this quarter (once a tradable level is established).

 We switch our roll cost calculations from LIBOR to SOFR rates given LIBOR’s impending discontinuation as a reference rate. Roll cost figures appear richer when measured vs. the SOFR basis given a historically positive LIBOR-SOFR spread.

 Interest rate risk remains low this quarter with the Fed unlikely to raise rates for a few more quarters, but the December FOMC meeting could impact risk sentiment, e.g. in case of a hawkish surprise on the timeline for tapering and/or liftoff. We see dividend risk for the S&P 500 and Nasdaq 100 rolls due to uncertainty on the timing and amount of AVGO’s dividends, and uncertainty around a number of dividend hikes and special dividends that are expected to be announced during the roll period.