U.S. News

• U.S. Unemployment Report

• • • The U.S. economy added 143,000 jobs in January, below the expected 169,000, while the unemployment rate fell to 4%
    • Wage growth exceeded expectations, with average hourly earnings rising 0.5% for the month and 4.1% year-over-year
    • The labor force participation rate increased to 62.6%, and job growth was concentrated in health care (44,000), retail (34,000), and government (32,000)

• Factory Orders

• • • New orders for manufactured goods fell 0.9% ($5.2 billion) in December, marking a decline in four of the last five months
    • Shipments increased 0.6% ($3.7 billion), continuing a two-month upward trend, with transportation equipment leading the growth
    • Inventories rose 0.4% ($3.3 billion), with durable goods up 0.4% and nondurable goods up 0.3%, marking the second consecutive monthly increase

• Consumer Credit

• • • Total consumer credit rose by $40.8 billion in December, the biggest gain since June 2022, after a $5.4 billion decline in November
    • Revolving credit (credit card debt) surged at a 20.2% annual rate, following a 12.1% drop in the previous month
    • Nonrevolving credit (auto and student loans) increased at a 5.8% annual rate, after a 2.7% rise in November

• Jobless Claims

• • • Initial jobless claims, a measure of how many workers were laid off across the U.S., increased
      to 219,000 in the week ended January 31, up 11,000 from the prior week.
    • The four-week moving average was 216,750, up 4000 from the prior week.
    • Continuing claims – those filed by workers unemployed for longer than a week – increased by
      36,000 to 1.886 million in the week ended January 24. This figure is reported with a one-week
      lag.

• Fed’s Balance Sheet

• • • The Federal Reserve’s assets totaled $6.811 trillion in the week ended February 7, down $7.3
      billion from the prior week.
    • Treasury holdings totaled $4.267 trillion, down $7.4 billion from the prior week.
    • Holdings of mortgage-backed securities (MBS) were $2.22 trillion in the week, down $14.7 billion
      from the prior week.

• Total Public Debt

• • • Total public debt outstanding was $36.22 trillion as of February 7, an increase of 5.8% from the
      previous year.
    • Debt held by the public was $28.89 trillion, and intragovernmental holdings were $7.31 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 $3,272.54 per 40ft
      • Drewry’s composite World Container Index has decreased by (13.6%) 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 released three Israeli hostages in exchange for 183 Palestinian prisoners as part of a cease-fire agreement. The condition of the released hostages raised concerns, with Israeli officials reporting signs of malnutrition
    • The UK Home Office has paused decisions on over 6,600 Syrian asylum applications following the fall of Bashar al-Assad’s regime in December. The delay is attributed to uncertainty over the new government led by Ahmed al-Sharaa, a former rebel leader, whose forces are still considered a terrorist group by the UK
    • The U.S. State Department approved a $7.4 billion arms sale to Israel, including $6.75 billion in bombs, guidance kits, and fuses, plus $660 million in Hellfire missiles. The weapons are intended to strengthen Israel’s defense, though concerns remain over their use in Gaza. Congress still needs to approve the deal
    • Donald Trump proposed relocating nearly two million Palestinians out of Gaza and placing the area under U.S. control, an idea that was once taboo in Israeli politics but is now gaining support among Israeli right-wing politicians. His proposal has been widely condemned internationally as a form of ethnic cleansing

• Europe

• • • After the collapse of Michel Barnier’s government in December 2024, new Prime Minister François Bayrou passed the 2025 budget using Article 49.3, avoiding a full parliamentary vote. The budget includes €50 billion in spending cuts and tax increases to address France’s 6% GDP deficit, but political instability remains a concern
    • The European Commission is tightening regulations on platforms like Shein and Temu to curb the influx of cheap, potentially unsafe goods from China. The proposed measures include removing the €150 tax exemption on small parcels and introducing stricter customs checks
    • Ukraine is willing to offer access to its rare earth minerals in exchange for continued U.S. military aid, as proposed by President Trump. However, most of these resources are in Russian-occupied or contested areas, making extraction challenging
    • Following a mass shooting in Örebro that resulted in 11 fatalities, former Swedish Prime Minister Magdalena Andersson advocated for tighter gun control and enhanced social media regulations

• China

• • • The Trump administration suspended the de minimis trade exemption, which allowed Chinese imports under $800 to enter the U.S. duty-free. This move targets platforms like Shein and Temu, potentially raising costs for consumers and disrupting supply chains
    • After briefly halting parcels from China due to new tariffs, USPS resumed shipments while working with U.S. Customs to collect tariffs. The removal of de minimis means Chinese e-commerce sellers now face full import duties
    • Nearly 25% of publicly listed Chinese companies reported Q3 2024 losses, the highest since before COVID-19. Overcapacity and weak demand are driving price wars, especially in industries like solar energy and steel, making companies more vulnerable to U.S. tariffs
    • The Australian government has banned Chinese AI chatbot DeepSeek from all government systems and mobile devices, citing national security risks. The ban follows similar actions taken by Italy and restrictions imposed by U.S. agencies like NASA and the U.S. Navy, reflecting growing concerns about Chinese AI technology and data security

• United Kingdom

• • • The Bank of England (BOE) cut interest rates by 0.25 percentage points to 4.5%, citing slowing economic growth and inflation concerns, while warning that U.S. tariffs could further weaken the global economy. The BOE also lowered its growth forecast for the U.K. economy and expects further rate cuts throughout 2025

• Hong Kong

• • • Hong Kong is filing a WTO complaint against the U.S. tariffs, arguing that the 10% levies imposed on its exports violate WTO rules and undermine its status as a separate customs territory from China. The tariffs were imposed by the Trump administration, and Hong Kong is seeking dispute resolution to defend its trade rights

• Sudan

• • • Sudan’s military forces are close to retaking Khartoum from the Rapid Support Forces (RSF) after nearly two years of civil war, with recent victories in Wad Madani and key strategic areas in the capital. The conflict, which has displaced over 12 million people, is a power struggle between Lt. Gen. Abdel Fattah al-Burhan and RSF commander Lt. Gen. Mohamed Hamdan Dagalo

• Cayman Islands

• • • A 7.6 magnitude earthquake struck the Caribbean Sea south of the Cayman Islands on February 8, 2025, prompting tsunami alerts in several regions, including Puerto Rico, the Dominican Republic, Cuba, and the U.S. Virgin Islands. While initial warnings urged coastal evacuations, most advisories were later canceled. There were no immediate reports of significant damage
  • India
  • • • India’s central bank (RBI) cut its key policy rate from 6.50% to 6.25%, marking its first rate cut in nearly five years, as the economy slows and inflation cools. The move aligns with India’s efforts to stimulate growth, while also navigating trade tensions with the U.S. under the Trump administration
  • Canada
  • • • Canada recorded a C$708 million trade surplus in December 2024, driven by a jump in energy exports to the U.S. and a weaker Canadian dollar. The surplus comes amid uncertainty over potential U.S. tariffs, as President Trump threatened a 25% tariff on Canadian imports, prompting Ottawa to consider retaliatory measures
  • 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

  Commodities

  • Oil Prices
  • • • WTI: $70.96 per barrel
        • (2.16%) WoW; (1.06%) YTD; (3.93%) YoY
      • Brent: $74.60 per barrel
        • (2.81%) WoW; (0.05%) YTD; (5.82%) YoY
  • US Production
  • • • U.S. oil production amounted to 13.5 million bpd for the week ended January 31, up 0.0 million
        bpd from the prior week.
  • Rig Count
  • • • The total number of oil rigs amounted to 586, up 4 from last week.
  • Inventories

  • • • Crude Oil

        • Total U.S. crude oil inventories now amount to 423.8 million barrels, down (0.9%) YoY.
        • Refiners operated at a capacity utilization rate of 84.5% for the week, up from 83.5%
          in the prior week.
        • U.S. crude oil imports now amount to 6.448 million barrels per day, down 0.1% YoY.

      • Gasoline

        • Retail average regular gasoline prices amounted to $3.14 per gallon in the week of
          February 7, down (0.8%) YoY.
        • Gasoline prices on the East Coast amounted to $3.13, down (3.0%) YoY.
        • Gasoline prices in the Midwest amounted to $3.00, up 0.5% YoY.
        • Gasoline prices on the Gulf Coast amounted to $2.81, down (3.5%) YoY.
        • Gasoline prices in the Rocky Mountain region amounted to $3.09, up 7.9% YoY.
        • Gasoline prices on the West Coast amounted to $4.06, down (1.3%)
        • Motor gasoline inventories were up by 2.2 million barrels from the prior week.
        • Motor gasoline inventories amounted to 251.1 million barrels, up 0.0% YoY.
        • Production of motor gasoline averaged 9.17 million bpd, up 1.7% YoY.
        • Demand for motor gasoline amounted to 8.328 million bpd, down (5.4%) YoY.

      • Distillates

        • Distillate inventories decreased by -5.5 million in the week of February 7.
        • Total distillate inventories amounted to 118.5 million barrels, down (7.1%) YoY.
        • Distillate production averaged 4.552 million bpd, up 4.5% YoY.
        • Demand for distillates averaged 4.599 million bpd in the week, up 20.5% YoY.
  • Natural Gas
  • • • Natural gas inventories decreased by 174 billion cubic feet last week.
      • Total natural gas inventories now amount to 2,397 billion cubic feet, down (7.2%) YoY.

  

  Credit News

  High yield bond yields decreased 3bps to 7.12% and spreads decreased 1bps to 286bps. Leveraged loan yields decreased 11bps to 8.63% and spreads decreased 8bps to 466bps. WTD high yield bond returns were positive 18bps, while Leveraged loan returns remained unchanged. 10-year Treasury yield decreased 7bps to 4.44%. Yields and spreads declined as investors absorbed trade headlines, earnings, and active capital markets. 4Q earnings have been solid overall, though guidance has been mixed due to rising uncertainty from trade policy.

  High-yield:

  Week ended 02/07/2025

  • 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 02/07/2025

  • 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: City Brewing ($886mn, 1/2/2025), 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 02/07/2025

  • 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
  

  ZCGC RE Research:

  High prices and mortgage rates have stalled demand, causing sales to plunge, inventory to surge past Housing Bust levels, and home prices to start falling in major cities.

  

  Pending home sales dropped 8.0% year-over-year in December, marking the 34th month of year-over-year declines in 35 months.

  

  30-Year Fixed Mortgage Rate now at 6.95%, back to pre-QE levels after Fed ended stimulus and shed $2.11T in mortgage-backed securities.

  

  Homebuilders have plenty of supply to meet actual demand, with inventory at 456,000 unsold new houses, up 14% year-over-year.

  The Southwest is drowning in supply: The biggest inventory increases occurred in the South and West, with supply up 34% in Phoenix, 31% in Austin, 29% in Nashville, and 24% in Tampa.