U.S. News

• Consumer Confidence

• • • The Consumer Confidence index fell 5.4 points to 104.1 in January
    • Confidence fell primarily among consumers under 55 and high-income households, while
      lower-income groups saw gains
    • Inflation expectations rose to 5.3%, with more consumers anticipating higher interest rates.
      While buying plans for big-ticket items remained stable, vacation plans declined, and spending
      on services like dining out and streaming remained strong

• FOMC Interest Rate Decision

• • • The Federal Reserve kept interest rates unchanged at 4.25%-4.5%, marking a pause after three
      consecutive cuts, citing a strong labor market and persistent inflation concerns
    • Chair Jerome Powell emphasized the need for further progress on inflation or labor market
      weakness before considering future rate adjustments
    • Despite solid economic growth and consumer spending, inflation remains above the Fed’s 2%
      target, and markets anticipate rate cuts later in 2025

• PCE Index

• • • Inflation remained steady in December, with the PCE index rising 0.3% and core PCE increasing
      0.2% month-over-month, both in line with forecasts
    • The Federal Reserve kept interest rates unchanged, emphasizing the need for more progress on
      inflation before adjusting policy
    • Personal income grew by 0.4% and consumer spending rose 0.7%, slightly surpassing expectations

• Jobless Claims

• • • Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased
      to 207,000 in the week ended January 24, down 16,000 from the prior week.
    • The four-week moving average was 212,500, down 1000 from the prior week.
    • Continuing claims – those filed by workers unemployed for longer than a week – decreased by
      42,000 to 1.858 million in the week ended January 17. This figure is reported with a one-week
      lag.

• Fed’s Balance Sheet

• • • The Federal Reserve’s assets totaled $6.818 trillion in the week ended January 31, down $13.6
      billion from the prior week.
    • Treasury holdings totaled $4.275 trillion, down $0.0 billion from the prior week.
    • Holdings of mortgage-backed securities (MBS) were $2.22 trillion in the week, down $8.7 billion
      from the prior week.

• Total Public Debt

• • • Total public debt outstanding was $36.22 trillion as of January 31, an increase of 6.0% from the
      previous year.
    • Debt held by the public was $28.85 trillion, and intragovernmental holdings were $7.38 trillion.

• Inflation Factors

• CPI:

• • • • The consumer-price index rose 2.9% in December year over year.
      • On a monthly basis, the CPI increased 0.4% in December on a seasonally adjusted basis,
        after increasing 0.3% in November.
      • The index for all items less food and energy (core CPI) rose 0.2% in December, after
        rising 0.3% in November.
      • Core CPI increased 3.2% for the 12 months ending December.

• Food & Beverages:

• • • • The food at home index increased 1.8% in December from the same month a year earlier,
        and increased 0.3% in December month over month.
      • The food away from home index increased 3.6% in December from the same month a year
        earlier, and increasing 0.3% in December month over month.

• Commodities:

• • • • The energy commodities index increased 4.3% in December after increasing 0.5% in
      • The energy commodities index fell (3.8%) over the last 12 months.
      • The energy services index rose 0.8% in December after decreasing (0.5%) in November.
      • The energy services index rose 3.3% over the last 12 months.
      • The gasoline index fell (3.4%) over the last 12 months.
      • The fuel oil index fell (13.1%) over the last 12 months.
      • The index for electricity rose 2.8% over the last 12 months.
      • The index for natural gas rose 4.9% over the last 12 months.

• Supply Chain:

• • • • Drewry’s composite World Container Index decreased to $3,364.17 per 40ft
      • Drewry’s composite World Container Index has decreased by (12.0%) over the last 12
        months.

• Housing Market:

• • • • The shelter index increased 0.3% in December after increasing 0.3% in November.
      • The rent index increased 0.3% in December after increasing 0.3% in November.
      • The index for lodging away from home decreased (2.1%) in December after decreasing
        (1.0%) in November.

• Federal Funds Rate

• • • The effective Federal Funds Rate is at 4.33%, flat 0.00% year to date.

World News

• Middle East

• • • Hamas announced the release of three hostages under the Gaza cease-fire deal, including Israeli-American Keith Siegel, amid a phased exchange prioritizing women, elderly, and wounded hostages
    • The truce remains fragile as Israel and Hamas navigate disputes, while upcoming negotiations aim for a permanent end to the war despite political tensions in Israel
    • Syrian rebel leader Ahmed al-Sharaa declared himself president, dissolved the national army and all opposition groups, and began forming a transitional government after ending 54 years of Assad family rule.
    • His administration faces major challenges in maintaining order, rebuilding the economy, and drafting a new constitution while seeking to lift international sanctions

• Europe

• • • Germany’s inflation rate declined to 2.3% in January, down from 2.6% in December, but still remains above the ECB’s 2% target
    • The ECB, which reduced its deposit rate to 2.75% due to a weak economy, continues to monitor services inflation, which remains relatively high despite easing in other sectors
    • The eurozone economy stagnated in the final months of 2024, with flat GDP growth in the fourth quarter and weak performance in major economies like France and Germany, undermining hopes for a recovery
    • This economic slowdown, compounded by cautious consumer spending and a potential rise in U.S. tariffs, has led to a less optimistic outlook for 2025

• China

• • • China’s housing crisis continues as private developers, like China Vanke, face severe financial struggles, leading to increased state control of the sector
    • With Vanke projecting a $6.3 billion loss for 2024, state-backed companies are taking over more of the market, while Beijing focuses on completing homes for buyers rather than rescuing struggling developers, leaving the overall market outlook unclear
    • China’s manufacturing sector contracted in January, with the PMI dropping to 49.1 from 50.1 in December, as factories slowed down for the Lunar New Year holiday
    • Both production and demand weakened, with new export orders falling to their lowest point since March, while industrial profits declined by 3.3% in 2024

• North Korea

• • • North Korean troops have been absent from the frontlines in Russia’s Kursk region for weeks following heavy casualties, with around 4,000 of the 12,000 soldiers deployed being killed or injured

• Japan

• • • The Bank of Japan raised interest rates to 0.5%, the highest since 2008, signaling confidence that rising wages will maintain inflation around its 2% target, while remaining cautious about external economic risks

• Ireland

• • • Storm Éowyn caused widespread devastation in Ireland, leaving over 300,000 properties without power as of Sunday, down from 768,000 on Friday. The storm brought record-breaking winds of 114 mph, toppled infrastructure like telephone poles and a giant wind turbine, and prompted Ireland to call for assistance from England and France

• Africa

• • • The Rwandan-backed M23 rebel group has caused the displacement of an estimated 300,000 people as it advances toward Goma, with reports of widespread civilian harm and the use of advanced weaponry by Rwandan troops
  • South Korea
  • • • South Korean President Yoon Suk Yeol has been indicted for leading an insurrection following his brief imposition of martial law on December 3, 2024, a move that banned political activity and media, leading to his impeachment and subsequent detention
  • Canada
  • • • Canadian Prime Minister Justin Trudeau warned that President Donald Trump’s proposed 25% tariffs on Canadian products, set to potentially take effect February 1, 2025, would raise prices for American consumers on essential goods like oil, lumber, and autos, while Canada prepares retaliatory tariffs
  • Afghanistan
  • • • The ICC chief prosecutor has requested arrest warrants for Taliban leaders Haibatullah Akhundzada and Abdul Hakim Haqqani, accusing them of crimes against humanity for the systemic persecution of women and girls in Afghanistan, marking the first case focused on gender-based persecution as a central crime
  • Sudan
  • • • The U.S. has sanctioned Sudan’s de facto president, Lieutenant General Abdel Fattah al-Burhan, as punishment for his handling of the country’s devastating civil war. The decision comes one week after the Biden administration accused Burhan’s rival, Mohamed Hamdan Dagalo, of committing genocide by targeting Black Sudanese in the Darfur region

  Commodities

  • Oil Prices
  • • • WTI: $73.02 per barrel
        • (2.20%) WoW; 1.81% YTD; (3.73%) YoY
      • Brent: $76.76 per barrel
        • (2.22%) WoW; 2.84% YTD; (6.06%) YoY
  • US Production
  • • • U.S. oil production amounted to 13.2 million bpd for the week ended January 24, down 0.2 million
        bpd from the prior week.
  • Rig Count
  • • • The total number of oil rigs amounted to 582, up 6 from last week.
  • Inventories

  • • • Crude Oil

        • Total U.S. crude oil inventories now amount to 415.1 million barrels, down (1.6%) YoY.
        • Refiners operated at a capacity utilization rate of 83.5% for the week, down from 85.9%
          in the prior week.
        • U.S. crude oil imports now amount to 6.745 million barrels per day, down 15.0% YoY.

      • Gasoline

        • Retail average regular gasoline prices amounted to $3.11 per gallon in the week of
          January 31, down (1.4%) YoY.
        • Gasoline prices on the East Coast amounted to $3.19, down (0.2%) YoY.
        • Gasoline prices in the Midwest amounted to $3.03, up 2.7% YoY.
        • Gasoline prices on the Gulf Coast amounted to $2.79, down (1.8%) YoY.
        • Gasoline prices in the Rocky Mountain region amounted to $3.04, up 6.8% YoY.
        • Gasoline prices on the West Coast amounted to $4.02, down (1.3%)
        • Motor gasoline inventories were up by 3.0 million barrels from the prior week.
        • Motor gasoline inventories amounted to 248.9 million barrels, down (2.1%) YoY.
        • Production of motor gasoline averaged 9.19 million bpd, down (0.9%) YoY.
        • Demand for motor gasoline amounted to 8.302 million bpd, up 1.9% YoY.

      • Distillates

        • Distillate inventories decreased by -5.0 million in the week of January 31.
        • Total distillate inventories amounted to 124.0 million barrels, down (5.2%) YoY.
        • Distillate production averaged 4.738 million bpd, up 8.1% YoY.
        • Demand for distillates averaged 4.506 million bpd in the week, up 19.9% YoY.
  • Natural Gas
  • • • Natural gas inventories decreased by 321 billion cubic feet last week.
      • Total natural gas inventories now amount to 2,571 billion cubic feet, down (3.3%) YoY.

  

  Credit News

  High yield bond yields decreased 6bps to 7.15% and spreads increased 5bps to 287bps. Leveraged loan yields decreased 7bps to 8.74% and spreads increased 2bps to 474bps. WTD high yield bond returns were positive 30bps. WTD Leveraged loan returns were positive 10bps. 10-year Treasury yield decreased 13bps to 4.51%. HY asset class continues to benefit from resumption of inflows and positive macro signals emanating from a benign start to earnings season. Leveraged loan prices rose modestly amid accelerating inflows and heavy repricing activity.

  High-yield:

  Week ended 01/31/2025

  • Yields & Spreads¹
    
  • Pricing & Returns¹
    
  • Fund Flows²
    
  • New Issue²
    
  • Distressed Level (trading in excess of 1,000 bps)²
    
  • Total HY Defaults
    

  ¹ Source: Credit Suisse High Yield and Leveraged Loan Index
  ² Source: JP Morgan

  Leveraged loans:

  Week ended 01/31/2025

  • Yields & Spreads¹
    
  • Leveraged Loan Index¹
    
  • Fund Flows²
    
  • New Issue²
    
  • Distressed Level (loan price below $80)¹
    
  • Total Loan Defaults
    

  Default activity:

  • Most recent defaults include: The Container Store ($163mn, 12/22/2024), Party City ($264mn, 12/21/2024), Hearthside Food Solutions ($2.6bn, 11/22/24), Spirit Airlines ($1.1bn, 11/18/24), Franchise Group Inc ($1.1bn, 11/3/24), Exactech ($254mn, 10/29/24), American Tire Distributors ($975mn, 10/23/24), and Accuride ($291mn, 10/11/2024).

  CLOs:

  Week ended 01/31/2025

  • New U.S. CLO Issuance²
    
  • New U.S. CLO Issuance²
    

  Note:High-yield and leveraged loan yields and spreads are swap-adjusted

  ¹ Source: Credit Suisse High Yield and Leveraged Loan Index
  ² Source: JP Morgan

  Ratings activity:

  • S&P and Moody’s High Yield Ratings
    

  Appendix:

  Diagram A: Leveraged Loan Trading Levels
  
  Source: Credit Suisse Leveraged Loan Index

  Diagram B: High Yield and Leveraged Loan LTM Price
  

  Diagram C: Leveraged Loan and High Yield Returns
  

  
  

  Diagram J: Leveraged Loan Defaults by Sector – Full Year
  

  Diagram L: CLO Economics
  

  Diagram N: Developed Country GovBond Yields (%)
  

  Diagram O: S&P 500 Historical Multiples
  

  Diagram P: U.S. Middle-Market M&A Valuations (EV/EBITDA)
  

  Diagram Q: U.S. Large Cap M&A Valuations (EV/EBITDA
  

  Diagram R: Dry Powder for All Private Equity Buyouts
  

  Diagram S: Structured Credit Spreads
  

  Diagram T: Structured Credit Yield
  

  Diagram U: SOFR CURVE
  

  Diagram V: CMBS Spreads
  
  

  Freight Rates

  Drewry World Container Index
  

  China-Global & Shanghai Export Container Freight Index