U.S. News

Retail Sales

• U.S. retail sales rose 0.1% in May from April, lower than the 0.2% increase that economists expected
• Excluding autos, retail sales slipped 0.1% in May from April; economists expected a 0.2% gain
• Consumers increased their spending on cars, electronics and clothing, while pulling away from purchases at gas stations and stores selling furntiture, building materials and sporting goods

Existing Home Sales

• Prices for existing homes rose to $419,300 in May, a year over year increase of 5.8%
• Sales of previously owned homes decreased 0.7% from April, the third straight monthly decline
• Despite lower demand, low inventory continues to spur bidding wars among home buyers, triggering an increase in prices
• Inventory has declined because high mortgage rates are deterring potential seller from listing their homes

Housing Starts Data

• Privately-owned housing starts were at a seasonally adjusted annual rate of 1,277,000 in May, which is down 5.5% from the April estimate of 1,352,000
• The May results were 19.3% lower than the May 2023 rate of 1,583,000
• Single-family housing starts were at a seasonally adjusted annual rate of 982,000 in May, which is down 5.2% from the April estimate of 1,036,000

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 238,000 in the week ended June 14, down 5,000 from the prior week
• The four-week moving average was 232,750, up 5500 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 15,000 to 1.828 million in the week ended June 7. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.253 trillion in the week ended June 21, down $6.4 billion from the prior week
• Treasury holdings totaled $4.458 trillion, down $3.4 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.35 trillion in the week, up $0.0 billion from the prior week



Total Public Debt

• Total public debt outstanding was $34.73 trillion as of June 21, an increase of 7.9% from the previous year
• Debt held by the public was $25.30 trillion, and intragovernmental holdings were $7.06 trillion



Inflation Factors

CPI:

• The consumer-price index rose 3.3% in May year over year
• On a monthly basis, the CPI increased 0.0% in May on a seasonally adjusted basis, after increasing 0.3% in April
• The index for all items less food and energy (core CPI) rose 0.2% in May, after rising 0.3% in April
• Core CPI increased 3.4% for the 12 months ending May

Food and Beverages:

• The food at home index increased 1.0% in May from the same month a year earlier, and decreased 0.0% in May month over month
• The food away from home index increased 4.0% in May from the same month a year earlier, and increased 0.4% in May month over month

Commodities:

• The energy commodities index decreased (3.5%) in May after increasing 2.7% in
• The energy commodities index fell 2.1% over the last 12 months
• The energy services index 0.3% in May after decreasing (1.3%) in April
• The energy services index rose 4.7% over the last 12 months
• The gasoline index rose 2.2% over the last 12 months
• The fuel oil index fell 3.6% over the last 12 months
• The index for electricity rose 5.9% over the last 12 months
• The index for natural gas fell 0.2% over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index increased to $5,116.87 per 40ft container for
• Drewry’s composite World Container Index has increased by 233.2% over the last 12 months

Housing Market:

• The shelter index increased 0.4% in May after increasing 0.4% in April
• The rent index increased 0.4% in May after increasing 0.4% in April
• The index for lodging away from home increased 1.4% in May after increasing 0.9% in April

Federal Funds Rate

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

World News

• Israel/Gaza

  • Israel conducted an airstrike on Saturday targeting Hamas military infrastructure in the residential Al-Shati refugee camp and the Al-Tuffah neighborhood. Hamas claims the attack killed 38 people and wounded 50 more
  • Israeli military plans outline an assault into Lebanon should a larger-scale conflict between Israel and Hezbollah break out. The operation pends approval from the Israeli government
  • Prime Minister Netanyahu dismantled the war cabinet, a small group intended to bring a unified approach in the war against Hamas, following disagreements among cabinet members in how to manage the Gaza war and the hostage crisis
  • An Israeli military spokesperson last week questioned Prime Minister Netanyahu’s aim of destroying Hamas, claiming this goal is not achievable without simultaneously replacing Hamas with another governing authority in the Gaza Strip. This statement highlighted the growing rift between Netanyahu and the Israeli military leadership

• Russia

  • Putin visited Vietnam on Thursday, securing university partnerships and cooperation between national tax authorities. Russia was unable to secure defensive or military arrangements regarding the war in Ukraine
  • Russia and North Korea signed a defensive pact, agreeing to provide ‘military and other assistance’ should the other be attacked
  • Russia stated it is awaiting a response from the U.S. on proposals for a potential prisoner exchange, likely referring to Wall Street Journal reporter Evan Gershkovich and other detained U.S. citizens

• Europe

  • The European Commission recommended launching an Excessive Deficit Procedure against France, Italy, Belgium, Poland, Hungary, Slovakia, and Malta. EU policy requires governments to maintain budget deficits below 3% of GDP
  • The European Union plans to impose additional tariffs on Chinese electric vehicles, in response to high Chinese state subsidies that could price out European EV car manufacturers. The tariffs will fall below the levels announced by the Biden administration
  • 23 of 32 EU countries are currently on track to spend at least 2% of their economy on national defense this year, which is up from 6 in 2018

• China

  • Several Chinese companies announced that they have been told by the government to pay tax bills for tax misconduct dating as far back as the 1990s. The Chinese government denies that they are investigating tax evasion on a national scale
  • Xi Jinping ordered an escalation in the purge of the Chinese military, emphasizing the dangers of corruption and ideological subversion in the People’s Liberation Army
  • China urges the U.S. to avoid interfering in internal affairs after U.S. leaders visited the Dalai Lama in India

• Saudi Arabia

  • More than 1,170 pilgrims have died during the annual Hajj event, due to temperatures peaking above 125 degrees. This is the highest death toll at the pilgrimage since a stampede in 2015

• Mexico

  • Tropical storm Alberto ravages Mexico’s Gulf Coast, bringing heavy rain and flooding. While the storm brought little damage, it is the first named storm of what is expected to be a busy Atlantic hurricane season

• France

  • Reports indicate that most French Jews are expected to vote for the far-right National Rally party in the upcoming snap elections. This marks a significant shift, driven by the left’s perceived softness on the October 7 attack and the rising antisemitic sentiments in the country

• South Africa

  • South African President Cyril Ramaphosa was re-elected after forming a coalition government with the pro-business Democratic Alliance and the Inkatha Freedom Party, following the ANC’s loss of its absolute majority in recent elections

• Japan

  • The Bank of Japan will reduce government bond purchases, signaling monetary tightening, but left its interest rate unchanged. Despite this, the yen weakened due to a lack of specifics on the bond reduction plan

• Taiwan

  • Taiwan’s central bank kept interest rates unchanged at 2.000%, citing cooling inflation and solid economic growth. The bank also raised the reserve requirement ratio by 25 basis points to address the heating property market

• Argentina

  • Argentina’s Senate approved a slimmed-down version of President Javier Milei’s economic reform package, including labor reforms and limited privatizations, amid violent protests and concerns about his ability to enact further measures

• 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

Commodities

• Oil Prices

  • WTI: $80.62 per barrel
    • 2.77% WoW; +12.52% YTD; +15.98% YoY
  • Brent: $85.09 per barrel
    • 2.99% WoW; +10.45% YTD; +14.77% YoY

• US Production

  • U.S. oil production amounted to 13.2 million bpd for the week ended June 14, down 0.1 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 588, down 2 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 457.1 million barrels, down (1.3%) YoY
    • Refiners operated at a capacity utilization rate of 93.5% for the week, down from 95.0% in the prior week
    • U.S. crude oil imports now amount to 8.304 million barrels per day, down 14.5% YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.46 per gallon in the week of June 21,
      down (3.6%) YoY
      • Gasoline prices on the East Coast amounted to $3.47, down (1.4%) YoY
      • Gasoline prices in the Midwest amounted to $3.40, down (4.8%) YoY
      • Gasoline prices on the Gulf Coast amounted to $3.09, down (3.3%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.45, down (10.1%) YoY
      • Gasoline prices on the West Coast amounted to $4.42, down (5.5%) YoY
    • Motor gasoline inventories were down by 2.3 million barrels from the prior week
    • Motor gasoline inventories amounted to 231.2 million barrels, up 4.4% YoY
    • Production of motor gasoline averaged 10.17 million bpd, up 3.6% YoY
    • Demand for motor gasoline amounted to 9.386 million bpd, up 0.1% YoY

  • Distillates

    • Distillate inventories decreased by -1.7 million in the week of June 21
    • Total distillate inventories amounted to 121.6 million barrels, up 6.4% YoY
    • Distillate production averaged 4.760 million bpd, down (6.2%) YoY
    • Demand for distillates averaged 3.977 million bpd in the week, down (0.0%) YoY

  • Natural Gas

    • Natural gas inventories increased by 71 billion cubic feet last week
    • Total natural gas inventories now amount to 3,045 billion cubic feet, up 11.6% YoY

    

Credit News

High yield bond yields increased 5bps to 7.82% and spreads increased 3bps to 341bps. Leveraged loan yields increased 10bps to 9.32% and spreads increased 10bps to 506bps. WTD Leveraged loan returns were negative 5bps. WTD high yield bond returns were flat. 10yr treasury yields increased 1bps to 4.25%. Yields and spreads rose amid a softer tone in economic data, mild flows, and the slower pace of capital market activity

High-yield:

Week ended 06/21/2024

• 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 06/21/2024

• 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 06/21/2024

• 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:

• Dubai’s real estate market is defying predictions of a slowdown, with property prices rising for 15 consecutive quarters and home values up 20% year-on-year as of May 2024, driven by strong demand from Europe, India, and South Asia.
• Despite geopolitical tensions and rising living costs, Dubai saw record property transactions in 2023 and early 2024, with prices surging 60% and rents up 83% since 2020, due to an influx of wealthy investors and favorable policies.
• Dubai’s property market has experienced sharp booms and busts, notably a major downturn in 2009 due to debt-fueled growth. Prices rebounded in 2011 but slumped again in 2014 following an oil price collapse. To limit volatility, the government introduced reforms, such as increasing required down payments for mortgages to 20%.
• Still, CBRE expects prices to start moderating from next year through 2027 as the bulk of new homes hits the market. CBRE thought the market would moderate by now considering the massive increases over the past few years. But now, looking at the dynamics, we’re unlikely to see as big of a drop as the previous cycles in the near future.

Section 2:
30 Year Fixed Mortgage
6/20/24: 6.87

10-year US Treasury
6/20/24: 4.25

Spread
6/20/24: 2.62