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Definition of "backwardation" [back•war•da•tion]

  • The situation in a futures market where prices for future delivery are lower than prices for immediate (or nearer) delivery. Generally arising from a near-term shortage of a commodity. (noun)
  • 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. (noun)

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Use "backwardation" in a sentence
  • "A certain degree of backwardation is normal (hence the phrase "normal backwardation")."
  • ""The methodology employed by the underlying index of USCI seeks to minimize the harmful effects of contagion by favoring commodities in backwardation (positive roll-yield) and longer-term contracts," he explains."
  • "We are seeing signs of increasing demand for energy, evidenced by the oil market recently moving into "backwardation" -- where current oil contracts are priced higher than future ones."