U.S. News
- U.S. Employment Report
- U.S. added 272,000 jobs in May, surpassing the expected 180,000 and the 165,000 jobs added in April
- The unemployment rate increased to 4% in May, up from 3.9% in April, marking the first time it has reached this level since January 2022
- Average hourly earnings rose by 0.4% in May and 4.1% year-over-year, reversing a previous downward trend
- Factory Orders
- New orders for manufactured goods in April increased by $4.3 billion (0.7%) to $588.2 billion, marking the third consecutive month of growth
- Shipments of manufactured goods in April increased by $5.9 billion (1.0%) to $590.2 billion
- Inventories of manufactured goods in April increased by $0.9 billion (0.1%) to $858.3 billion
- Trade Deficit
- The U.S. trade deficit surged by almost 9% in April to $74.6 billion, the highest in 18 months
- Imports rose by 2.4% to $338.2 billion, driven by higher demand for cars, computer accessories, and capital goods
- Exports increased by 0.8% to $263.7 billion, with a notable rise in pharmaceutical drug shipments
- Jobless Claims
- Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 229,000 in the week ended May 31, up 8,000 from the prior week
- The four-week moving average was 222,250, down 750 from the prior week
- Continuing claims – those filed by workers unemployed for longer than a week – increased by 2,000 to 1.792 million in the week ended May 24. This figure is reported with a one-week lag
- Fed’s Balance Sheet
- The Federal Reserve’s assets totaled $7.256 trillion in the week ended June 7, down $28.6 billion from the prior week
- Treasury holdings totaled $4.465 trillion, down $24.1 billion from the prior week
- Holdings of mortgage-backed securities (MBS) were $2.35 trillion in the week, down $15.7 billion from the prior week
- Total Public Debt
- Total public debt outstanding was $34.67 trillion as of June 7, an increase of 8.6% from the previous year
- Debt held by the public was $25.07 trillion, and intragovernmental holdings were $7.06 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% in
- The energy commodities index fell 1.1% over the last 12 months
- The energy services index (1.3%) in March after decreasing (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 $4,716.22 per 40ft container for
- Drewry’s composite World Container Index has increased by 180.6% 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 0.4% 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/Gaza
- An Israeli military operation on Saturday rescued four Israeli hostages from Gaza, resulting in over 200 Palestinian casualties according to Hamas, although Israel disputes this number
- The U.S. and Israeli officials are renewing efforts for a cease-fire and a broader deal, with U.S. Secretary of State Antony Blinken visiting the Middle East to push for negotiations
- The rescue operation has intensified positions on both sides, with Israel emphasizing military pressure and Hamas demanding guarantees for the safety of Gazans before further talks
-
Russia
- French President Emmanuel Macron and US President Joe Biden released a joint “roadmap” supporting efforts to use frozen Russian assets to aid Ukraine during Biden’s state visit to Paris
- At least 28 people died after Ukrainian attacks on Russian-held areas in the Luhansk and Kherson regions, according to Russian-installed authorities
- Russian forces have installed eight barges on the southern side of the Kerch Bridge in Crimea to defend against Ukrainian attacks, according to the UK Ministry of Defence
-
Europe
- The European Central Bank (ECB) lowered its key interest rate to 3.75% from 4%, marking the first rate cut since 2019
- The The ECB’s decision diverges from the Federal Reserve, which is not expected to reduce rates for several months
- The ECB’s decision comes amid persistent inflationary pressures in Europe, with underlying inflation in the eurozone rising to 2.9% in May from 2.7% in April
-
China
- China’s exports rose by 7.6% in May compared to the previous year, up from a 1.5% increase in April
- Exports to the Association of Southeast Asian Nations increased by 22.5% in May, while exports to the U.S. rose by 3.6%, reversing a decline in April
- China’s imports grew by 1.8% in May, down from an 8.4% increase in April, resulting in a trade surplus of $82.62 billion for the month
-
South Korea
- South Korea’s exports rose 11.7% in May, led by a 55% increase in semiconductor shipments, contributing to a trade surplus of $4.96 billion
-
India
- Indian Prime Minister Narendra Modi’s BJP failed to secure an outright majority in the recent election, winning around 240 seats, but Modi is poised to keep power for a third term through coalition alliances
-
South Africa
- South Africa’s ruling African National Congress (ANC) is seeking to form a government of national unity after losing its absolute majority in the recent national elections, winning only 40% of the vote
-
Mexico
- Claudia Sheinbaum, Mexico City’s former mayor, is projected to become Mexico’s first female president, winning by a landslide against the opposition coalition’s candidate, Xóchitl Gálvez
-
UK
- Nigel Farage has re-entered British politics as the leader of Reform UK, aiming to challenge the Conservative Party and influence the upcoming election with his anti-immigration and populist platform
-
Canada
- The Bank of Canada cut its main interest rate by 0.25%, becoming the first G-7 central bank to ease policy amid cooling inflation and slower economic growth
-
Germany
- German industrial production decreased by 0.1% in April compared to the previous month, following a 0.4% decline in March, and missed economists’ forecast of a 0.2% increase
-
Iceland
- A volcano in southwestern Iceland erupted for a fifth time since December, forcing the evacuation of a nearby town and the Blue Lagoon geothermal spa
Commodities
-
Oil Prices
- WTI: $75.28 per barrel
- (2.22%) WoW; +5.07% YTD; +5.60% YoY
- Brent: $79.39 per barrel
- (2.73%) WoW; +3.05% YTD; +4.52% YoY
-
US Production
- U.S. oil production amounted to 13.1 million bpd for the week ended May 31, down 0.0 million bpd
from the prior week
-
Rig Count
- The total number of oil rigs amounted to 594, down 6 from last week
-
Inventories
-
Crude Oil
- Total U.S. crude oil inventories now amount to 455.9 million barrels, down (0.7%) YoY
- Refiners operated at a capacity utilization rate of 95.4% for the week, up from 94.3% in the prior week
- U.S. crude oil imports now amount to 6.769 million barrels per day, down 10.3% YoY
-
Gasoline
- Retail average regular gasoline prices amounted to $3.47 per gallon in the week of June 7,
down (3.1%) YoY
- Gasoline prices on the East Coast amounted to $3.55, up 1.1% YoY
- Gasoline prices in the Midwest amounted to $3.43, down (2.1%) YoY
- Gasoline prices on the Gulf Coast amounted to $3.14, down (0.3%) YoY
- Gasoline prices in the Rocky Mountain region amounted to $3.48, down (7.8%) YoY
- Gasoline prices on the West Coast amounted to $4.61, down (0.3%) YoY
- Motor gasoline inventories were up by 2.1 million barrels from the prior week
- Motor gasoline inventories amounted to 230.9 million barrels, up 5.5% YoY
- Production of motor gasoline averaged 9.48 million bpd, down (5.8%) YoY
- Demand for motor gasoline amounted to 8.946 million bpd, down (3.0%) YoY
-
Distillates
- Distillate inventories decreased by 2.5 million in the week of May 31
- Total distillate inventories amounted to 119.3 million barrels, up 11.8% YoY
- Distillate production averaged 5.030 million bpd, down (0.2%) YoY
- Demand for distillates averaged 3.795 million bpd in the week, up 4.1% YoY
-
Natural Gas
- Natural gas inventories increased by 84 billion cubic feet last week
- Total natural gas inventories now amount to 2,795 billion cubic feet, up 14.3% YoY
Credit News
High yield bond yields decreased 14bps to 7.81% and spreads increased 9bps to 337bps. Leveraged loan yields decreased 26bps to 9.24% and spreads decreased 1bps to 492bps. WTD Leveraged loan returns were positive 20bps. WTD high yield bond returns were positive 80bps. 10yr treasury yields decreased 27bps to 4.28%. Yields came down due to the recent rise in rate volatility, stronger-than expected non-farm US payroll, job growth rebound, and expectation of only one Fed rate cut for 2024.
High-yield:
Week ended 06/07/2024
- 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 06/07/2024
- 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 06/07/2024
- 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
Real Estate
Section 1:
- During the record year of 2023, spending on factory construction spiked by 71% from 2022, and by 138% from 2021, to $196 billion
- As seen in the above graph, a notable spike started in late 2021. The surge coincides with the passage of the CHIPS Act in August 2022, which could be a contributing factor
- A result of a massive corporate and government rethink after the supply-chain and transportation chaos during the pandemic
- On a year-over-year basis, the PPI for nonresidential construction has been negative for the first four months of 2024
- Construction costs for non-factory buildings are down, yet factory building investment is surging.
- Businesses are prioritizing building new factories despite potentially lower overall construction costs elsewhere
- The explanation lies in expensive, specialized equipment needed for modern factories, which isn’t captured in construction spending data
Section 2:
30 Year Fixed Mortgage
6/6/24: 6.99
10-year US Treasury
6/5/24: 4.29
U.S. News
- U.S. Employment Report
- U.S. added 272,000 jobs in May, surpassing the expected 180,000 and the 165,000 jobs added in April
- The unemployment rate increased to 4% in May, up from 3.9% in April, marking the first time it has reached this level since January 2022
- Average hourly earnings rose by 0.4% in May and 4.1% year-over-year, reversing a previous downward trend
- Factory Orders
- New orders for manufactured goods in April increased by $4.3 billion (0.7%) to $588.2 billion, marking the third consecutive month of growth
- Shipments of manufactured goods in April increased by $5.9 billion (1.0%) to $590.2 billion
- Inventories of manufactured goods in April increased by $0.9 billion (0.1%) to $858.3 billion
- Trade Deficit
- The U.S. trade deficit surged by almost 9% in April to $74.6 billion, the highest in 18 months
- Imports rose by 2.4% to $338.2 billion, driven by higher demand for cars, computer accessories, and capital goods
- Exports increased by 0.8% to $263.7 billion, with a notable rise in pharmaceutical drug shipments
- Jobless Claims
- Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 229,000 in the week ended May 31, up 8,000 from the prior week
- The four-week moving average was 222,250, down 750 from the prior week
- Continuing claims – those filed by workers unemployed for longer than a week – increased by 2,000 to 1.792 million in the week ended May 24. This figure is reported with a one-week lag
- Fed’s Balance Sheet
- The Federal Reserve’s assets totaled $7.256 trillion in the week ended June 7, down $28.6 billion from the prior week
- Treasury holdings totaled $4.465 trillion, down $24.1 billion from the prior week
- Holdings of mortgage-backed securities (MBS) were $2.35 trillion in the week, down $15.7 billion from the prior week
- Total Public Debt
- Total public debt outstanding was $34.67 trillion as of June 7, an increase of 8.6% from the previous year
- Debt held by the public was $25.07 trillion, and intragovernmental holdings were $7.06 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% in
- The energy commodities index fell 1.1% over the last 12 months
- The energy services index (1.3%) in March after decreasing (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 $4,716.22 per 40ft container for
- Drewry’s composite World Container Index has increased by 180.6% 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 0.4% 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/Gaza
- An Israeli military operation on Saturday rescued four Israeli hostages from Gaza, resulting in over 200 Palestinian casualties according to Hamas, although Israel disputes this number
- The U.S. and Israeli officials are renewing efforts for a cease-fire and a broader deal, with U.S. Secretary of State Antony Blinken visiting the Middle East to push for negotiations
- The rescue operation has intensified positions on both sides, with Israel emphasizing military pressure and Hamas demanding guarantees for the safety of Gazans before further talks
-
Russia
- French President Emmanuel Macron and US President Joe Biden released a joint “roadmap” supporting efforts to use frozen Russian assets to aid Ukraine during Biden’s state visit to Paris
- At least 28 people died after Ukrainian attacks on Russian-held areas in the Luhansk and Kherson regions, according to Russian-installed authorities
- Russian forces have installed eight barges on the southern side of the Kerch Bridge in Crimea to defend against Ukrainian attacks, according to the UK Ministry of Defence
-
Europe
- The European Central Bank (ECB) lowered its key interest rate to 3.75% from 4%, marking the first rate cut since 2019
- The The ECB’s decision diverges from the Federal Reserve, which is not expected to reduce rates for several months
- The ECB’s decision comes amid persistent inflationary pressures in Europe, with underlying inflation in the eurozone rising to 2.9% in May from 2.7% in April
-
China
- China’s exports rose by 7.6% in May compared to the previous year, up from a 1.5% increase in April
- Exports to the Association of Southeast Asian Nations increased by 22.5% in May, while exports to the U.S. rose by 3.6%, reversing a decline in April
- China’s imports grew by 1.8% in May, down from an 8.4% increase in April, resulting in a trade surplus of $82.62 billion for the month
-
South Korea
- South Korea’s exports rose 11.7% in May, led by a 55% increase in semiconductor shipments, contributing to a trade surplus of $4.96 billion
-
India
- Indian Prime Minister Narendra Modi’s BJP failed to secure an outright majority in the recent election, winning around 240 seats, but Modi is poised to keep power for a third term through coalition alliances
-
South Africa
- South Africa’s ruling African National Congress (ANC) is seeking to form a government of national unity after losing its absolute majority in the recent national elections, winning only 40% of the vote
-
Mexico
- Claudia Sheinbaum, Mexico City’s former mayor, is projected to become Mexico’s first female president, winning by a landslide against the opposition coalition’s candidate, Xóchitl Gálvez
-
UK
- Nigel Farage has re-entered British politics as the leader of Reform UK, aiming to challenge the Conservative Party and influence the upcoming election with his anti-immigration and populist platform
-
Canada
- The Bank of Canada cut its main interest rate by 0.25%, becoming the first G-7 central bank to ease policy amid cooling inflation and slower economic growth
-
Germany
- German industrial production decreased by 0.1% in April compared to the previous month, following a 0.4% decline in March, and missed economists’ forecast of a 0.2% increase
-
Iceland
- A volcano in southwestern Iceland erupted for a fifth time since December, forcing the evacuation of a nearby town and the Blue Lagoon geothermal spa
Commodities
-
Oil Prices
- WTI: $75.28 per barrel
- (2.22%) WoW; +5.07% YTD; +5.60% YoY
- Brent: $79.39 per barrel
- (2.73%) WoW; +3.05% YTD; +4.52% YoY
-
US Production
- U.S. oil production amounted to 13.1 million bpd for the week ended May 31, down 0.0 million bpd
from the prior week
-
Rig Count
- The total number of oil rigs amounted to 594, down 6 from last week
-
Inventories
-
Crude Oil
- Total U.S. crude oil inventories now amount to 455.9 million barrels, down (0.7%) YoY
- Refiners operated at a capacity utilization rate of 95.4% for the week, up from 94.3% in the prior week
- U.S. crude oil imports now amount to 6.769 million barrels per day, down 10.3% YoY
-
Gasoline
- Retail average regular gasoline prices amounted to $3.47 per gallon in the week of June 7,
down (3.1%) YoY
- Gasoline prices on the East Coast amounted to $3.55, up 1.1% YoY
- Gasoline prices in the Midwest amounted to $3.43, down (2.1%) YoY
- Gasoline prices on the Gulf Coast amounted to $3.14, down (0.3%) YoY
- Gasoline prices in the Rocky Mountain region amounted to $3.48, down (7.8%) YoY
- Gasoline prices on the West Coast amounted to $4.61, down (0.3%) YoY
- Motor gasoline inventories were up by 2.1 million barrels from the prior week
- Motor gasoline inventories amounted to 230.9 million barrels, up 5.5% YoY
- Production of motor gasoline averaged 9.48 million bpd, down (5.8%) YoY
- Demand for motor gasoline amounted to 8.946 million bpd, down (3.0%) YoY
-
Distillates
- Distillate inventories decreased by 2.5 million in the week of May 31
- Total distillate inventories amounted to 119.3 million barrels, up 11.8% YoY
- Distillate production averaged 5.030 million bpd, down (0.2%) YoY
- Demand for distillates averaged 3.795 million bpd in the week, up 4.1% YoY
-
Natural Gas
- Natural gas inventories increased by 84 billion cubic feet last week
- Total natural gas inventories now amount to 2,795 billion cubic feet, up 14.3% YoY
Credit News
High yield bond yields decreased 14bps to 7.81% and spreads increased 9bps to 337bps. Leveraged loan yields decreased 26bps to 9.24% and spreads decreased 1bps to 492bps. WTD Leveraged loan returns were positive 20bps. WTD high yield bond returns were positive 80bps. 10yr treasury yields decreased 27bps to 4.28%. Yields came down due to the recent rise in rate volatility, stronger-than expected non-farm US payroll, job growth rebound, and expectation of only one Fed rate cut for 2024.
High-yield:
Week ended 06/07/2024
- 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 06/07/2024
- 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 06/07/2024
- 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
Real Estate
Section 1:
- During the record year of 2023, spending on factory construction spiked by 71% from 2022, and by 138% from 2021, to $196 billion
- As seen in the above graph, a notable spike started in late 2021. The surge coincides with the passage of the CHIPS Act in August 2022, which could be a contributing factor
- A result of a massive corporate and government rethink after the supply-chain and transportation chaos during the pandemic
- On a year-over-year basis, the PPI for nonresidential construction has been negative for the first four months of 2024
- Construction costs for non-factory buildings are down, yet factory building investment is surging.
- Businesses are prioritizing building new factories despite potentially lower overall construction costs elsewhere
- The explanation lies in expensive, specialized equipment needed for modern factories, which isn’t captured in construction spending data
Section 2:
30 Year Fixed Mortgage
6/6/24: 6.99
10-year US Treasury
6/5/24: 4.29