Asia FX dithers as dollar steadies before Powell speech; yen muted after CPI data
Investing.com -- The SPDR S&P 500 ETF Trust (ASX:SPY), one of the world's largest exchange-traded funds, ended Wednesday's historic trading session with its widest premium to its underlying holdings since 2008. The $576 billion fund closed about 90 basis points above its net-asset value after surging 10.5%, the most significant rise in 16 years, according to data from Bloomberg.
For context, the average dislocation of SPY to its net-asset value over the past ten years has been a fraction of a basis point. In the early months of the Covid-19 pandemic in 2020, the fund also traded above or below its net-asset value, but none of those gaps were as wide as Wednesday's.
The surge of capital into SPY on Wednesday afternoon was likely due to traders rapidly covering bearish trades. The fund, known for its liquidity, typically trades around 56 million shares a day over the past year. However, on Wednesday, closing-auction volumes were about 300% higher than usual, a factor that likely drove up the premium, according to Matt Bartolini, head of SPDR Americas Research at State Street (NYSE:STT) Global Advisors.
Bartolini explained that the SPY's function as a significant liquidity vehicle for a large number of traders and investors likely contributed to the large balance of buy orders coming in, pushing the price up. He emphasized that the extreme market moves of recent days provided the context for the frenzied trading.
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