U.S. News

PCE Price Index

• The PCE price index was unchanged in May and slowed to 2.6% annually, down from 2.7% in April
• Core PCE price index, excluding food & energy, increased 0.1% in May and 2.6% YoY, the lowest annual rate since March 2021
• Personal income increased by 0.5% in May, exceeding the 0.4% estimate, while consumer spending grew by 0.2%, below the 0.3% forecast

New Home Sales

• New-home sales in the U.S. dropped 11.3% in May to an annual rate of 619,000, the lowest level since November
• The median sales price of a new home sold in May fell slightly to $417,400 from $417,900 in the previous month
• Inventory of new homes for sale increased by 14.8% between April and May, reaching the highest level since October 2022

Durable-goods Orders

• Orders for durable goods increased 0.1% in May, better than the expected 1.0% decline, but the increase in April was revised down to 0.2% from 0.6%
• New orders for manufactured goods, excluding transportation, fell 0.1% in May, marking the third decline in the past six months
• Core orders, which exclude defense and transportation, dropped 0.6% in May, showing little improvement in new investment over the past year

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 233,000 in the week ended June 21, down 6,000 from the prior week
• The four-week moving average was 236,000, up 3000 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 18,000 to 1.839 million in the week ended June 14. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.231 trillion in the week ended June 28, down $21.4 billion from the prior week
• Treasury holdings totaled $4.453 trillion, down $4.7 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.35 trillion in the week, down $8.2 billion from the prior week



Total Public Debt

• Total public debt outstanding was $34.72 trillion as of June 28, an increase of 7.4% from the previous year
• Debt held by the public was $25.43 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 $5,318.38 per 40ft container for
• Drewry’s composite World Container Index has increased by 255.9% 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 is nearing the end of major combat operations in Rafah and is preparing for an extended counterinsurgency campaign in Gaza, focusing on lower-intensity operations such as raids and airstrikes
  • Israeli Defense Minister Yoav Gallant indicated that the transition to this new phase will impact developments on all fronts, including a potential escalation on the northern border with Hezbollah
  • Various postwar plans for Gaza include proposals for creating isolated “bubbles” for civilians, establishing security corridors and a fortified perimeter, and involving international or local governance
  • Israel’s military operation in Rafah has worsened the hunger crisis in southern Gaza, where nearly all of the population faces high levels of acute food insecurity, with half a million people already experiencing famine-like conditions

• Russia

  • A series of coordinated attacks in Russia’s Dagestan region targeted a synagogue, police stations, and churches, resulting in at least 20 deaths, including 15 police officers, and injuring 46 others
  • Among the attackers were two sons of the head of the Sergokala district, Magomed Omarov, who has been detained. The attackers were linked to an international terrorist organization
  • Russia banned broadcasts of 81 EU media outlets, including AFP and Politico, in retaliation for the EU’s suspension of several Russian media organizations

• Europe

  • Hungarian Prime Minister Viktor Orbán announced the formation of a new EU parliament alliance called “Patriots for Europe” with Austria’s far-right Freedom Party and the Czech centrist group ANO, led by ex-premier Andrej Babis
  • Hungary will assume the rotating six-month EU presidency on July 1, 2024, promoting a “strong European policy” under the slogan “Make Europe Great Again.”
  • The EU imposed its first sanctions on Russian LNG, banning re-export through EU ports to hinder Russia’s gas exports and revenue

• China

  • China’s manufacturing sector remained in contraction for the second consecutive month in June 2024, with the PMI at 49.5, below the expansion threshold of 50
  • Industrial profits in China increased by 0.7% year-on-year in May 2024, a slowdown from the 4.0% growth recorded in April , indicating sustained economic headwinds amidst a prolonged property market slump
  • Foreign Direct Investment (FDI) into China fell 28.2% year-on-year in the January to May period compared to the previous year, reflecting continued decline amidst heightened global trade tensions and regulatory scrutiny

• Kenya

  • Kenyan police opened fire on protesters who stormed parliament in Nairobi amid demonstrations against proposed tax increases aimed at addressing the country’s debt crisis, resulting in several deaths and widespread unrest

• France

  • French consumer confidence drops to 89 in June from 90 in May amid political uncertainty following President Macron’s dissolution of the National Assembly and upcoming elections

• Canada

  • Canada’s GDP grew by 0.3% in April 2024 but slowed to 0.1% growth in May, suggesting a soft economic backdrop that could influence future rate cuts by the Bank of Canada

• Sweden

  • Sweden’s central bank, Riksbank, holds key policy rate at 3.75% but anticipates two to three cuts later in the year based on inflation outlook and economic activity

• 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

• 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

• 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

• 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

Commodities

• Oil Prices

  • WTI: $81.54 per barrel
    • 1.00% WoW; +13.80% YTD; +16.72% YoY
  • Brent: $86.41 per barrel
    • 1.37% WoW; +12.16% YTD; +16.24% YoY

• US Production

  • U.S. oil production amounted to 13.2 million bpd for the week ended June 21, down 0.0 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 581, down 7 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 460.7 million barrels, up (1.5%) YoY
    • Refiners operated at a capacity utilization rate of 92.2% for the week, down from 93.5% in the prior week
    • U.S. crude oil imports now amount to 7.054 million barrels per day, down 0.5% YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.50 per gallon in the week of June 28,
      down (1.1%) YoY
      • Gasoline prices on the East Coast amounted to $3.47, down (0.9%) YoY
      • Gasoline prices in the Midwest amounted to $3.40, down (3.6%) YoY
      • Gasoline prices on the Gulf Coast amounted to $3.11, down (5.0%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.41, down (11.5%) YoY
      • Gasoline prices on the West Coast amounted to $4.40, down (5.6%) YoY
    • Motor gasoline inventories were down by 2.7 million barrels from the prior week
    • Motor gasoline inventories amounted to 233.9 million barrels, up 5.4% YoY
    • Production of motor gasoline averaged 9.88 million bpd, down (2.3%) YoY
    • Demand for motor gasoline amounted to 8.969 million bpd, down (3.6%) YoY

  • Distillates

    • Distillate inventories decreased by -0.4 million in the week of June 28
    • Total distillate inventories amounted to 121.3 million barrels, up 6.0% YoY
    • Distillate production averaged 4.902 million bpd, up 4.1% YoY
    • Demand for distillates averaged 3.536 million bpd in the week, up 6.7% YoY

  • Natural Gas

    • Natural gas inventories increased by 52 billion cubic feet last week
    • Total natural gas inventories now amount to 3,097 billion cubic feet, up 10.4% YoY

    

Credit News

High yield bond yields increased 1bps to 7.84% and spreads decreased 1bps to 341bps. Leveraged loan yields increased 3bps to 9.35% and spreads increased 3bps to 508bps. WTD Leveraged loan returns were positive 7bps. WTD high yield bond returns positive 5bps. 10yr treasury yields increased 3bps to 4.29%. Yields and spreads widened modestly over the past week with further decompression in ratings taking place amid soft macro data, HY fund outflows, and continued modest capital market activity.

High-yield:

Week ended 06/28/2024

• 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 06/28/2024

• 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 06/28/2024

• 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