U.S. News

Consumer Price Index

• Prices rose by 3.2% for the 12 months ended in February, up slightly from January’s reading of 3.1%
• Pushing inflation higher in February was a sharp climb in gas prices and the continued steady rise in shelter costs. Combined, those two categories were responsible for 60% of the monthly increase
• Excluding gas and food prices, core inflation rose 0.4% from the month before, bringing its annual rate to 3.8%, a slowdown from 3.9% in January

U.S. Retail Sales

• Retail sales in the US were up 0.6% month-over-month in February
• The biggest increases were seen in sales for building materials, motor vehicles and part dealers, electronics appliance stores, and gasoline
• A decline was recorded in sales at furniture stores, clothing, health, and non-store retailers

Consumer Sentiment

• The consumer sentiment index decreased to 76.9 in February from 76.5 in January, as Americans grew somewhat more cautious ahead of the presidential election
• After strong gains between November 2023 and January 2024, consumer views have stabilized into a holding pattern
• Consumers perceived few signals that the economy is currently improving or deteriorating

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 209,000 in the week ended March 8, down 1,000 from the prior week
• The four-week moving average was 208,000, down 500 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 17,000 to 1.811 million in the week ended March 1. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.542 trillion in the week ended March 15, up $3.1 billion from the prior week
• Treasury holdings totaled $4.629 trillion, down $2.9 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.40 trillion in the week, down $6.3 billion from the prior week



Total Public Debt

• Total public debt outstanding was $34.48 trillion as of March 15, an increase of 9.6% from the previous year
• Debt held by the public was $24.65 trillion, and intragovernmental holdings were $7.09 trillion



Inflation Factors

CPI:

• The consumer-price index rose 3.2% in February year over year
• On a monthly basis, the CPI increased 0.4% in February on a seasonally adjusted basis, after increasing 0.3% in January
• The index for all items less food and energy (core CPI) rose 0.4% in February, after rising 0.4% in January
• Core CPI increased 3.8% for the 12 months ending February

Food and Beverages:

• The food at home index increased 1.0% in February from the same month a year earlier, and decreased 0.0% in February month over month
• The food away from home index increased 4.5% in February from the same month a year earlier, and increased 0.1% in February month over month

Commodities:

• The energy commodities index increased 3.6% in February after decreasing (3.2%)
• The energy commodities index fell (4.1%) over the last 12 months
• The energy services index 0.1% in February after increasing 2.5% in January
• The energy services index fell 0.5% over the last 12 months
• The gasoline index fell (3.9%) over the last 12 months
• The fuel oil index fell (5.4%) over the last 12 months
• The index for electricity rose 3.6% over the last 12 months
• The index for natural gas fell (8.8%) over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index decreased to $3,161.83 per 40ft container
• Drewry’s composite World Container Index has increased by 76.6% over the last 12 months

Housing Market:

• The shelter index increased 0.4% in February after increasing 0.6% in January
• The rent index increased 0.4% in February after increasing 0.6% in January
• The index for lodging away from home increased 3.1% in February after increasing 4.3% in January

Fed Funds Rate

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

World News

• Israel

  • The Israeli military said it would work with the U.S. to set up a maritime corridor as part of an effort to “flood” the northern part of the Gaza Strip with aid as international pressure grows on Israel to do more to counter the hunger crisis unfolding in the Palestinian enclave
  • Israel’s war against Hamas in Gaza has caused aid groups to warn of a looming famine in the strip, spurring countries including the U.S. as well as humanitarian agencies to organize deliveries of food and other supplies via airdrops, boat shipments or truck convoys to Gaza’s virtually isolated north

• Russia

  • Vladimir Putin warned publicly for the second time in less than two weeks of the possibility of nuclear confrontation with the West, a saber the Russian president has been rattling with increasing frequency ahead of presidential elections
  • The comments, part of an interview with a Russian television presenter and propagandist and aired on state media, are central to the Kremlin leader’s domestic attempt to frame his war in Ukraine as a conflict with Western powers that he says want to destroy Russia
  • Convincing Russians that only he can provide security and stability to Russia and protect the country from the damaging influence of the West has been a message that Putin has sought to press home ahead of the presidential vote. The ballot, in which the opposition has been muzzled, is widely expected to return him to power for a fifth term

• China

  • China’s first major policy meeting of the year occurred last week, with high expectations for stronger stimulus to jump-start recovery in China’s slowing economy with the property sector still in a slump
  • China set its economic growth target for 2024 at “around 5%,” as widely expected by analysts. That’s the same goal it had for 2023 when it reported GDP growth of 5.2%, but analysts think it’ll be much harder to achieve that this time around, as post pandemic tailwinds fade and an unfavorable comparison base takes effect. Hitting the new target will likely require a fiscal stimulus push and resuscitation of the property sector. Officials gave signs of the first but not the latter
  • The head of the People’s Bank of China said during the meetings that there is room to further cut banks’ reserve requirements and pledged to use more monetary measures to help prop up prices. Beijing’s emphasis on consumer goods trade-in and equipment upgrade programs also caught analysts’ attention

• Japan

  • Jihadists kidnapped hundreds of children in Nigeria this past week. No group has claimed responsibility for the abduction, but it is likely the Islamic State West Africa Province or other factions of Boko Haram. Boko Haram abducted 200 schoolgirls back in 2014

• Japan

  • Some of Japan’s biggest companies have agreed to give their employees their largest pay rise in decades, as workers demand higher wages to combat inflation. Every spring, labor unions in Japan negotiate with companies on wages in a process called the Shunto. The average pay rise last year from the Shunto was 3.6%, already much higher than previous years

• India

  • India has successfully conducted the maiden flight test of an indigenously developed ballistic missile capable of carrying multiple warheads, Prime Minister Narendra Modi said, a development that enhances the country’s nuclear deterrence against rivals China and Pakistan

• Nigeria

  • Jihadists kidnapped hundreds of children in Nigeria this past week. No group has claimed responsibility for the abduction, but it is likely the Islamic State West Africa Province or other factions of Boko Haram. Boko Haram abducted 200 schoolgirls back in 2014

• Australia

  • Australian home prices hit a high in what was already one of the world’s most expensive real-estate markets. Now, Australian officials say they have a plan that will help to make housing more affordable: curtailing migration

• Canada

  • Lynx Air, a budget airline based in Calgary, is shutting down due to rising costs, unfavorable exchange rates, and competitive tension in the Canadian aviation market

• Argentina

  • President Javier Milei of Argentina hosted U.S. Secretary of State Antony J. Blinken in Buenos Aires to discuss reshaping Argentina’s foreign policy in alignment with the United States, amidst economic challenges and the pursuit of stability

• Brazil

  • Brazilian Federal Police seized the passport of former President Jair Bolsonaro and arrested four of his close allies as authorities narrowed in on the conservative and his aides over allegations that they plotted a military takeover as early as late-2022

Commodities

• Oil Prices

  • WTI: $81.00 per barrel
    • +3.83% WoW; +13.05% YTD; +18.51% YoY
  • Brent: $85.28 per barrel
    • +3.90% WoW; +10.70% YTD; +14.16% YoY

• US Production

  • U.S. oil production amounted to 13.1 million bpd for the week ended March 8, down 0.2 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 629, up 7 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 447.0 million barrels, down (6.9%) YoY
    • Refiners operated at a capacity utilization rate of 86.8% for the week, up from 84.9% in the prior week
    • U.S. crude oil imports now amount to 7.222 million barrels per day, down (11.7%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.44 per gallon in the week of March 15,
      down (0.5%) YoY
      • Gasoline prices on the East Coast amounted to $3.37, down (1.3%) YoY
      • Gasoline prices in the Midwest amounted to $3.36, down (0.5%) YoY
      • Gasoline prices on the Gulf Coast amounted to $3.03, down (4.3%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.19, down (17.1%) YoY
      • Gasoline prices on the West Coast amounted to $4.43, down (2.0%) YoY
    • Motor gasoline inventories were down by 5.7 million barrels from the prior week
    • Motor gasoline inventories amounted to 234.1 million barrels, down (0.8%) YoY
    • Production of motor gasoline averaged 9.91 million bpd, up 8.8% YoY
    • Demand for motor gasoline amounted to 9.044 million bpd, up 5.2% YoY

  • Distillates

    • Distillate inventories decreased by 0.9 million in the week of March 15
    • Total distillate inventories amounted to 117.9 million barrels, down (1.5%) YoY
    • Distillate production averaged 4.562 million bpd, up 3.0% YoY
    • Demand for distillates averaged 3.375 million bpd in the week, down (9.7%) YoY

  • Natural Gas

    • Natural gas inventories decreased by 9 billion cubic feet last week
    • Total natural gas inventories now amount to 2,325 billion cubic feet, up 17.9% YoY

    

Credit News

High yield bond yields increased 7bps to 7.74% and spreads decreased 12bps to 331bps. Leveraged loan yields increased 11bps to 9.32% and spreads decreased 5bps to 505bps. WTD Leveraged loan returns were positive 29bps. WTD high yield bond returns were negative 6bps. 10yr treasury yields increased 21bp to 4.30%. For the week, yields rose, and spreads tightened as investors absorbed a pair of above consensus February CPI and PPI inflation reports, solid labor market data, weaker than expected retail sales, and supportive earnings season. Three Fed rate cuts are expected in 2024 (down from five) with 25bp reductions expected in June, September, and December.

High-yield:

Week ended 03/15/2024

• 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 03/15/2024

• 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: Robertshaw ($820mn, 2/29/24), Thrasio LLC ($724mn, 2/28/24), Hornblower ($838mn, 2/20/24), Careismatic ($700mn, 1/22/24), Enviva Partners ($750mn, 1/15/24), Ligado Networks ($4.2bn, 11/1/23), and Air Methods ($1.7bn, 10/24/23).

CLOs:

Week ended 03/15/2024

• 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

Diagram V: SOFR CURVE

Freight Rates

Drewry World Container Index

China-Global & Shanghai Export Container Freight Index