Backwardation
Backwardation is a futures curve that falls with tenor — nearby richer than deferred, usually a tightness / convenience-yield story.
Definition
Backwardation refers to nearby richer than deferred, usually a tightness / convenience-yield story. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Physical balance, inventories, and curve shape transmit inflation and growth shocks. When nearby richer than deferred, usually a tightness / convenience-yield story shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what backwardation is saying. If nearby richer than deferred, usually a tightness / convenience-yield story moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Read spot vs curve and inventory; financial flows can dominate short windows. Prefer a short written null hypothesis for Backwardation: what would falsify the current reading in the next window?