U.S. News

Consumer Price Index

• U.S. consumer prices increased 0.3% in April and 3.4% year-on-year, indicating a resumption of the downward trend in inflation
• Core CPI, excluding food and energy, rose 0.3% in April and 3.6% year-on-year, marking the smallest annual increase since April 2021
• Retail sales were unchanged in April after increasing 0.6% in March, suggesting cooling domestic demand

Producer Price Index

• U.S. wholesale prices increased by 0.5% in April, surpassing the expected 0.3% rise, with the annual increase in wholesale prices reaching 2.2%
• Core producer prices, excluding food and energy, rose by 0.4% in April, pushing the annual increase in core prices to 3.1%
• The cost of raw materials surged by 3.2% in April, driven by higher oil prices and rising metal costs

Home Builder Confidence Index

• Builder confidence fell in May to its lowest level since January due to high mortgage rates, with the NAHB confidence index dropping 6 points to 45
• 25% of builders cut home prices in May, up from 22% in April, with the average price reduction being 6%
• Builders are increasingly using sales incentives to improve sales, with 59% employing these tactics in May, up from 57% in April

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 222,000 in the week ended May 10, down 10,000 from the prior week
• The four-week moving average was 217,750, up 2,500 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 13,000 to 1.794 million in the week ended May 3. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.304 trillion in the week ended May 17, down $49.1 billion from the prior week
• Treasury holdings totaled $4.515 trillion, down $3.7 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.37 trillion in the week, down $0.0 billion from the prior week



Total Public Debt

• Total public debt outstanding was $34.55 trillion as of May 17, an increase of 9.8% from the previous year
• Debt held by the public was $24.64 trillion, and intragovernmental holdings were $7.14 trillion



Inflation Factors

CPI:

• The consumer-price index rose 3.4% in April year over year
• On a monthly basis, the CPI increased 0.3% in April on a seasonally adjusted basis, after increasing 0.4% in March
• The index for all items less food and energy (core CPI) rose 0.3% in April, after rising 0.4% in March
• Core CPI increased 3.6% for the 12 months ending April

Food and Beverages:

• The food at home index increased 1.1% in April from the same month a year earlier, and decreased -0.2% in April month over month
• The food away from home index increased 4.1% in April from the same month a year earlier, and increased 0.3% in April month over month

Commodities:

• The energy commodities index increased 2.7% in April after increasing 1.5%
• The energy commodities index fell 1.1% over the last 12 months
• The energy services index (1.3%) in March after increasing (0.0%) in March
• The energy services index rose 3.6% over the last 12 months
• The gasoline index rose 1.2% over the last 12 months
• The fuel oil index fell (0.8%) over the last 12 months
• The index for electricity rose 5.1% over the last 12 months
• The index for natural gas fell (1.9%) over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index increased to $3,510.62 per 40ft
• Drewry’s composite World Container Index has increased by 104.1% over the last 12 months

Housing Market:

• The shelter index increased 0.4% in April after increasing 0.4% in March
• The rent index increased 0.5% in April after increasing 0.5% in March
• The index for lodging away from home increased 0.9% in April after increasing 5.6% in March

Federal Funds Rate

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

World News

• Israel

  • Israeli Prime Minister Benjamin Netanyahu has rejected U.S. demands for a postwar plan in Gaza, emphasizing the need for military victory over Hamas
  • U.S. officials, including Secretary of State Antony Blinken and National Security Adviser Jake Sullivan, are pressing Israel to pair military efforts with a political plan to ensure the enduring defeat of Hamas
  • Israeli discussions about postwar governance of Gaza have included the idea of a multiyear Arab-led civil administration, which Arab governments have rejected

• Ukraine

  • Ukraine is reinforcing its defenses in Kharkiv as Russian forces intensify their offensive in the region, capturing several villages and parts of Vovchansk
  • Ukrainian President Volodymyr Zelensky reported that Ukrainian forces have halted the latest Russian offensive and are inflicting serious losses on Russian troops in the northeastern border areas
  • Analysts suggest that Russia’s attacks in the northeast may aim to divert Ukrainian troops from other critical front-line areas, exploiting Ukraine’s manpower and ammunition shortages

• China

  • China’s retail sales growth slowed to 2.3% in April from 3.1% in March, falling short of the expected 4.0% rise
  • Fixed-asset investment in China rose 4.2% year-over-year during the January-to-April period, below the 4.7% expected and the 4.5% increase in the first quarter 
  • China’s industrial output grew 6.7% in April, exceeding the 5.5% growth expected and up from 4.5% in March

• Slovakia

  • A 71-year-old man has been charged with the attempted murder of Slovak Prime Minister Robert Fico, who is in stable but very serious condition
  • The Slovak government described the attack as a politically motivated “lone wolf” incident, noting that the suspect held antigovernment views and had attended opposition rallies
  • The attack has highlighted increasing political polarization in Slovakia and across Europe, fueled by issues such as the Ukraine war and migration.

• UK

  • The U.K. unemployment rate rose to 4.3% in the three months to March 2024, the highest since mid-2023, boosting hopes for a potential Bank of England rate cut in June

• Germany

  • In March 2024, German manufacturing orders decreased by 0.4%, contrary to the expected 0.5% rise, with significant declines in orders for aircraft, ships, trains, and metal products, despite a 1.1% increase in car industry orders and a 2.0% rise in foreign orders

• Chad

  • Chad’s state election body said interim Pesident Mahamat Idriss Derby had won the election with 61% of the vote. His opponent has also declared himself the winner, citing vote-rigging concerns.

• France

  • French President Emmanuel Macron is rekindling debate over whether France’s nuclear arsenal should play a role in deterring attacks against European allies, igniting criticism across the political spectrum from lawmakers who say any move to extend the country’s nuclear umbrella risks compromising a linchpin of national sovereignty

• Germany

  • German inflation held steady this month, adding to signs that price pressures have cooled sustainably in the eurozone’s most important economy. Consumer prices were on average 2.2% higher than in April of last year, the same rate booked in March, according to national-standard figures set out Monday by German statistics authority Destatis

• France

  • France is sending 1,000 police officers and deploying the army to New Caledonia after violent riots over proposed changes to voting rights, which have resulted in the deaths of at least five people and significant property damage

• Japan

  • Japan has intervened to prop up the yen after it hit a multidecade low against the dollar. The currency has plummeted against the dollar this year, hurt by increasing doubts among traders about the timing of U.S. interest rate cuts

• North Korea

  • Kim Ki Nam, the architect of North Korea’s cult-of-personality propaganda and mentor to Kim Jong Un, died at 94; Kim Jong Un will lead his state funeral

• Canada

  • Truck drivers at Canadian National Railway’s subsidiary CNTL ratified a four-year agreement covering 750 operators until December 31, 2027, amid potential strikes from Teamsters Canada at both Canadian National and Canadian Pacific Kansas City

• Poland

  • Russian missiles have breached Polish airspace several times since 2022, with the most recent incident occurring on March 24, 2024, when a Russian cruise missile entered Polish airspace for 39 seconds, posing a risk of wider conflict, according to Poland’s President Andrzej Duda

Commodities

• Oil Prices

  • WTI: $80.06 per barrel
    • +2.30% WoW; +11.74% YTD; +11.41% YoY
  • Brent: $84.00 per barrel
    • +1.46% WoW; +9.03% YTD; +10.73% YoY

• US Production

  • U.S. oil production amounted to 13.1 million bpd for the week ended May 10, down 0.0 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 604, up 1 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 457.0 million barrels, down (2.3%) YoY
    • Refiners operated at a capacity utilization rate of 90.4% for the week, up from 88.5% in the prior week
    • U.S. crude oil imports now amount to 6.969 million barrels per day, down (1.7%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.60 per gallon in the week of May 17,
      up 1.6% YoY
      • Gasoline prices on the East Coast amounted to $3.60, up 2.8% YoY
      • Gasoline prices in the Midwest amounted to $3.51, down 0.0% YoY
      • Gasoline prices on the Gulf Coast amounted to $3.26, up 3.1% YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.52, down (3.2%) YoY
      • Gasoline prices on the West Coast amounted to $4.82, up 4.4% YoY
    • Motor gasoline inventories were down by 0.2 million barrels from the prior week
    • Motor gasoline inventories amounted to 227.8 million barrels, up 4.3% YoY
    • Production of motor gasoline averaged 9.70 million bpd, up 2.3% YoY
    • Demand for motor gasoline amounted to 8.875 million bpd, down 0.4% YoY

  • Distillates

    • Distillate inventories decreased by 0.0 million in the week of May 17
    • Total distillate inventories amounted to 116.4 million barrels, up 9.5% YoY
    • Distillate production averaged 4.804 million bpd, down (1.1%) YoY
    • Demand for distillates averaged 3.831 million bpd in the week, up 2.5% YoY

  • Natural Gas

    • Natural gas inventories increased by 70 billion cubic feet last week
    • Total natural gas inventories now amount to 2,633 billion cubic feet, up 17.5% YoY

    

Credit News

High yield bond yields decreased 7bps to 7.73% and spreads decreased 1bps to 322bps. Leveraged loan yields decreased 11bps to 9.30% and spreads decreased 1bps to 491bps. WTD Leveraged loan returns were positive 20bps. WTD high yield bond returns were positive 33bps. 10yr treasury yields decreased 7bps to 4.38%. For the week, yields and spreads tightened amid steady retail inflows, lighter capital market activity, strong earnings, and as consumer price inflation moderated in April after the unpleasant strength in 1Q.

High-yield:

Week ended 05/17/2024

• 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 05/17/2024

• 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: 99 Cents Only Stores ($350mn, 4/7/24), ConvergeOne ($1.3bn, 4/4/24), Xplornet Communications ($1.2bn, 3/31/24), JoAnn Stores ($658mn, 3/18/24), New Insight Holdings ($1.2bn, 3/13/24), Robertshaw ($820mn, 2/29/24), Thrasio LLC ($724mn, 2/28/24), Hornblower ($838mn, 2/20/24), and Careismatic ($700mn, 1/22/24).

CLOs:

Week ended 05/17/2024

• 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: SOFR CURVE

Freight Rates

Drewry World Container Index

China-Global & Shanghai Export Container Freight Index