The basis can develop a narrowing trend when the futures price of an asset/ commodity increases faster than the sport price. For example, CBOT November wheat futures are up 3 cents on the day. However, the wheat bid for March delivery is up 6 cents on the day. In this case, the basis is said to have narrowed 3 cents. The basis can also narrow in a lower market. For example, the wheat futures decrease by 5 cents and the cash bid is only down 3 cents. As such, the basis is said to have narrowed 2 cents.
A basis narrowing is the opposite of a basis widening.
