U.S. News

December Jobs Update

• The U.S. economy added 216,000 jobs in December, higher than expected and larger than the 173,000 gain in November
• For 2023, the U.S. added 2.7 million jobs, a slowdown from 2022, but higher than pre-pandemic years
• The unemployment rate in December held at 3.7% rate, rising 0.3% throughout the year

U.S. Auto Sales

• U.S. new vehicle sales finished around 15.5 million units for 2023, up about 14.1% compared to last year
• Electric vehicles, including hybrids, made up nearly 17% of all new vehicle sales
• The average price of a new car was $47,936, down 3.5% since the start of the year, but up 33% since 2019

Construction Spending

• Construction spending rose for the 11 straight month to $2.04 trillion, up 0.4% from the previous month
• Private residential construction rose 1.1% in November with single-family construction rising 2.9% and multi-family construction rising 0.1%
• Overall, construction spending is up 11.3% compared to last year

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 202,000 in the week ended December 29, down 18,000 from the prior week
• The four-week moving average was 207,000, down 4750 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – decreased by 31,000 to 1.855 million in the week ended December 22. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.681 trillion in the week ended January 5, down $31.8 billion from the prior week
• Treasury holdings totaled $4.776 trillion, down $15.1 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.43 trillion in the week, down $14.6 billion from the prior week



Total Public Debt

• Total public debt outstanding was $33.99 trillion as of January 5, an increase of 8.3% from the previous year
• Debt held by the public was $24.51 trillion, and intragovernmental holdings were $7.03 trillion



Inflation Factors

CPI:

• The consumer-price index rose 3.1% in November year over year
• On a monthly basis, the CPI increased 0.1% in November on a seasonally adjusted basis, after increasing 0.0% in October
• The index for all items less food and energy (core CPI) rose 0.3% in November, after rising 0.2% in October
• Core CPI increased 4.0% for the 12 months ending November

Food and Beverages:

• The food at home index increased 1.7% i n November from the same month a year earlier, and increased 0.1% in November month over month
• The food away from home index increased 5.3% in November from the same month a year earlier, and increased 0.4% in November month over month

Commodities:

• The energy commodities index decreased (5.8%) in November after decreasing (4.9%)
• The energy commodities index fell (9.8%) over the last 12 months
• The energy services index 0.7% in November after decreasing (1.0%) in October
• The energy services index fell (0.1%) over the last 12 months
• The gasoline index fell (8.9%) over the last 12 months
• The fuel oil index fell (24.8%) over the last 12 months
• The index for electricity rose 3.4% over the last 12 months
• The index for natural gas fell (10.4%) over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index increased to $2,669.91 per 40ft container
• Drewry’s composite World Container Index has increased by 25.0% over the last 12 months

Housing Market:

• The shelter index increased 0.4% in November after increasing 0.3% in October
• The rent index increased 0.5% in November after increasing 0.3% in October
• The index for lodging away from home decreased (4.5%) in November after decreasing (6.1%) in October

Fed Funds Rate

• The effective Federal Funds Rate is at 5.33%, flat 0.00% year to date

World News

• Israel/Middle East

  • Secretary of state, Anthony Blinken, traveled back to the Middle East amid a surge in attacks across the region that have increased the risk of an expanding regional conflict. This is Mr. Blinken’s fourth trip since the Hamas led attack on Israel in October
  • Mr. Blinken arrived in Turkey on Friday and will also visit Jordan, Qatar, the United Arab Emirates, Saudi Arabia, Israel and Egypt
  • Iran-backed militants across the region have reacted to the war in Gaza with near daily attacks on Israel from Lebanon, dozens of strikes targeting U.S. forces in Iraq and Syria and assaults on commercial ships in the Red Sea from Houthi fighters in Yemen
  • Iran also moved a warship into the Red Sea, where American forces have shot down dozen of Houthi drones and missiles in recent weeks
  • This past Wednesday, the U.S. and 12 allies issued an ultimatum to Houthi fighters in Yemen to stop their attacks or face severe consequences

• Iran

  • The Islamic State has claimed responsibility for two explosions in Iran that killed nearly 100 people at a memorial service for top commander Qassem Soleimani in the city of Kerman. The twin blast injured an additional 284 people
  • The memorial was the marking of the fourth anniversary of the death of Soleimani, who was assassinated in Iraq in 2020 by a U.S. drone
  • The attached was the bloodiest attack in Iran since the 1979 Islamic Revolutions

• Russia

  • The U.S. has accused Russia of using ballistic missiles and launchers supplied by North Korea in its war on Ukraine
  • The U.S. had previously accused North Korea of supplying Russia with weapons, but this is the first time U.S. intelligence has shared details about ballistic missiles

• China

  • China’s Zhongzhi Enterprise group has declared bankruptcy, cementing one of China’s biggest corporate failures in recent history
  • Zhongrong International Trust, a major subsidiary of the company, had around $108 billion in assets under management in 2022 and told investors in November it had at least $31 billion more liabilities in assets

• South Korea

  • South Korea’s opposition party leader was stabbed in the neck in an attack that left him hospitalized in an incentive care unit

• North Korea

  • North Korea has fired more than 200 rounds of artillery shells of its west coast, towards the South Korea’s Yeonpyeong island, Seoul’s military has said

• India

  • The Indian navy has dispatched three guided-missile destroyers to protect commercial vessels in the Arabian Sea, after an attack last week on a chemical tanker off the Indian coast

• North Korea

  • North Korea appears to be operating a more powerful reactor for producing plutonium at its main nuclear site for the first time, the United Nations atomic agency said late Thursday

• Indonesia

  • At a Chinese nickel smelter in Indonesia, workers were undertaking routine maintenance at dawn when a massive explosion rocked the facility. Waste from a furnace had flowed out and hit flammable material, resulting in the deaths of at least 19 workers and injuring dozens more as hot steam hissed out and fire ripped through the building

• India

  • The Indian navy has dispatched three guided-missile destroyers to protect commercial vessels in the Arabian Sea, after an attack last week on a chemical tanker off the Indian coast

• North Korea

  • North Korea appears to be operating a more powerful reactor for producing plutonium at its main nuclear site for the first time, the United Nations atomic agency said late Thursday

• Czech Republic

  • At least 14 people were killed and dozens more were injured in a mass shooting at a university in central Prague. The shooter was a student at the school, Charles University, according to a spokesman from the Czech Ministry of the Interior 

• Germany

  • German authorities detained four alleged members of Hamas suspected of planning to attack Jewish institutions in the region—the first suggestion that the Gaza conflict might be spilling over beyond the Middle East

Commodities

• Oil Prices

  • WTI: $73.90 per barrel
    • 3.14% WoW; 3.14% YTD; 0.31% YoY
  • Brent: $78.82 per barrel
    • 2.31% WoW; 2.31% YTD; 0.17% YoY

• US Production

  • U.S. oil production amounted to 13.2 million bpd for the week ended December 29, down 0.1 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 621, down 1 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 431.1 million barrels, up 2.5% YoY
    • Refiners operated at a capacity utilization rate of 93.5% for the week, up from 93.3% in the prior week
    • U.S. crude oil imports now amount to 6.276 million barrels per day, down 20.7% YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.09 per gallon in the week of January 5,
      down (6.1%) YoY
      • Gasoline prices on the East Coast amounted to $3.23, down (2.5%) YoY
      • Gasoline prices in the Midwest amounted to $2.93, down (6.0%) YoY
      • Gasoline prices on the Gulf Coast amounted to $2.78, down (6.6%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $2.98, down (5.7%) YoY
      • Gasoline prices on the West Coast amounted to $4.18, up 3.0% YoY
    • Motor gasoline inventories were up by 10.9 million barrels from the prior week
    • Motor gasoline inventories amounted to 237.0 million barrels, up 6.4% YoY
    • Production of motor gasoline averaged 8.76 million bpd, up 3.4% YoY
    • Demand for motor gasoline amounted to 7.954 million bpd, up 5.9% YoY

  • Distillates

    • Distillate inventories decreased by 10.1 million in the week of January 5
    • Total distillate inventories amounted to 125.9 million barrels, up 6.0% YoY
    • Distillate production averaged 5.231 million bpd, up 29.6% YoY
    • Demand for distillates averaged 2.658 million bpd in the week, down (5.0%) YoY

  • Natural Gas

    • Natural gas inventories decreased by 14 billion cubic feet last week
    • Total natural gas inventories now amount to 3,476 billion cubic feet, up 20.2% YoY

    

Credit News

High yield bond yields increased 22bps to 7.93% and spreads widened 23bps to 388bps. Leveraged loan yields tightened 1bps to 9.09% and spreads tightened 5bps to 525bps. WTD Leveraged loan returns were positive 19bps. WTD high yield bond returns were negative 90bps. Markets reversed some of the spectacular December rally in the first week of January. High Yield (which benefited the most in December and November) underperformed loans. For context, high yield bonds earned most of the ~13% 2023 return in the last two months of the year. 10yr treasury yields also widened 10bps+ on the week.

High-yield:

Week ended 1/05/2024

• 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 1/05/2024

• 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: Ligado Networks ($4.2bn, 11/1/23), Air Methods ($1.7bn, 10/24/23), WeWork ($1.6bn, 10/15/23), Rite Aid ($3.0bn 10/16/23)

CLOs:

Week ended 1/05/2024

• 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: CAT Bonds – Cumulative Returns

Freight Rates

Drewry World Container Index

China-Global & Shanghai Export Container Freight Index