U.S. News

Consumer Price Index

• The CPI rose by 3% in June on an annual basis, a sharper slowdown than expected. Prices dropped 0.1% month-over-month
• Excluding food and energy, the core price index increased by 3.3% year-over-year and ticked up only slightly on a monthly basis
• Housing costs, a major component of the Consumer Price Index, showed signs of easing with overall housing costs rising 5.2% year-over-year and 0.2% from the previous month

Producer Price Index

• The PPI rose by 0.2% in June, slightly above the 0.1% forecast
• Core wholesale inflation, which excludes volatile food, energy, and trade margin categories, was unchanged in June, below the forecasted 0.2% increase
• The annual increase in wholesale prices rose to 2.6% in June from 2.4% in May, while core wholesale prices’ annual increase slowed to 3.1% from 3.3%

Consumer Credit

• Total consumer credit in the U.S. rose by $11.3 billion in May, up from a $6.5 billion increase in April
• Revolving credit, such as credit cards, increased by a 6.3% annual rate in May after a 0.8% decrease in April
• Nonrevolving credit, including auto and student loans, rose by a 1.4% rate in May, following a 2.4% increase 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 July 5, down 17,000 from the prior week
• The four-week moving average was 233,500, down 5250 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – decreased by 4,000 to 1.852 million in the week ended June 28. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.224 trillion in the week ended July 12, up $2.6 billion from the prior week
• Treasury holdings totaled $4.438 trillion, down $8.9 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.34 trillion in the week, down $10.4 billion from the prior week



Total Public Debt

• Total public debt outstanding was $34.89 trillion as of July 12, an increase of 7.2% from the previous year
• Debt held by the public was $25.65 trillion, and intragovernmental holdings were $7.22 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 $5,900.74 per 40ft container for
• Drewry’s composite World Container Index has increased by 296.5% 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 launched an airstrike targeting senior Hamas official Mohammed Deif near Khan Younis in southern Gaza, resulting in at least 90 Palestinian casualties in a designated humanitarian zone on July 13, 2024
  • Israeli Prime Minister Benjamin Netanyahu stated that it was unclear whether Deif and his deputy had been killed, but emphasized the operation aimed at key figures responsible for the October 7 attacks on Israel
  • The U.S. will soon begin shipping 500-pound bombs to Israel after previously suspending the delivery to reduce civilian casualties in Gaza. The heavier 2,000-pound bombs in the same shipment are still on hold. The shipment was initially paused in May due to concerns about civilian deaths

• Russia

  • NATO members have pledged an “irreversible path” for Ukraine’s future membership and committed €40bn in aid, including F-16 fighter jets and air defense support
  • Ukraine, now armed with American-made precision missiles, is targeting the Crimean Peninsula to degrade Russian military capabilities, focusing on airfields, air defenses, and logistics hubs
  • Kremlin spokesman Dmitry Peskov stated that European countries would be at risk if they accept deployments of long-range U.S. missiles, as Russia has the capability to deter these missiles
  • The Russian death toll has reached over 550,000 since the invasion began, with recent losses estimated at 1,000 soldiers per day

• UK

  • The U.K.’s economy grew by 0.4% in May 2024, surpassing the 0.2% growth forecast and rebounding from flat growth in April; GDP growth in the three months to May was 0.9%, the fastest since January 2022
  • The Bank of England’s Chief Economist Huw Pill suggested a potential future rate cut but emphasized inflation concerns, with services inflation at 5.7% in May despite overall inflation meeting the 2% target; the BOE’s key rate remains at a 16-year high
  • The U.K. government plans to release prisoners after serving 40% of their sentence, starting September, to address prison overcrowding, which has reached over 99% capacity

• China

  • China’s exports grew 8.6% year-over-year in June 2024, surpassing the 7.8% growth expected by economists and improving from May’s 7.6% increase. Imports fell unexpectedly by 2.3% in June, contrasting with a 1.8% increase in May and the 3.2% growth expected by economists
  • China’s producer-price index (PPI), reflecting factory-gate prices, fell by 0.8% in June, marking the 21st consecutive month of decline and indicating weak domestic demand despite government efforts to stimulate consumption
  • NATO leaders have identified China as a “decisive enabler” of Russia’s war against Ukraine, urging Beijing to stop all material and political support for Russia’s war efforts

• Japan

  • Japan’s Government Pension Investment Fund, which holds $1.53 trillion in assets, is preparing its first portfolio overhaul in five years, potentially shifting investments from foreign assets back to yen assets due to the yen’s weakness

• France

  • French President Emmanuel Macron has delayed appointing a new prime minister, calling for lawmakers in the divided National Assembly to reflect and identify guiding principles first

• Mexico

  • The Biden administration is imposing tariffs on Mexican imports that contain steel or aluminum from China, with a 25% tariff on steel products and a 10% duty on aluminum products, to prevent Chinese metals from entering the U.S. duty-free

• Germany

  • German industrial production fell by 2.5% in May, significantly weaker than the 0.1% increase in April, as car manufacturing declined, indicating a slower-than-expected recovery for Europe’s largest economy

• Canada

  • Canada averted a labor disruption at its Pacific Coast ports after the country’s labor-relations board deemed a strike notice by the union representing ship and dock foremen illegal, leading both the union and employers to rescind strike and lockout notices

• India

  • During his visit to Moscow, Indian Prime Minister Narendra Modi balanced reinforcing ties with Russia and publicly condemning a Russian missile attack on a children’s hospital in Kyiv, exemplifying India’s delicate diplomatic strategy amidst global tensions

• Iran

  • Iranians elected their first reformist president in two decades in a runoff election. Masoud Pezeshkian, who won more than 53% of the vote, campaigned on re-engaging in nuclear talks with the West and loosening moral codes for women

• North Korea

  • North Korea claimed to have successfully launched a multi-warhead missile, a top weapons goal for Kim Jong Un due to its resiliency against missile defense systems
  • South Korea disputed this claim, labeling the launch as a test of hypersonic technology, rather than multi-warhead missile technology

Commodities

• Oil Prices

  • WTI: $82.21 per barrel
    • (1.14%) WoW; +14.74% YTD; +6.92% YoY
  • Brent: $85.03 per barrel
    • (1.74%) WoW; +10.37% YTD; +4.51% YoY

• US Production

  • U.S. oil production amounted to 13.3 million bpd for the week ended June 5, up 0.1 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 584, down 1 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 445.1 million barrels, down (2.8%) YoY
    • Refiners operated at a capacity utilization rate of 95.4% for the week, up from 93.5% in the prior week
    • U.S. crude oil imports now amount to 6.547 million barrels per day, down (15.0%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.53 per gallon in the week of July 12,
      down (1.1%) YoY
      • Gasoline prices on the East Coast amounted to $3.56, up 0.8% YoY
      • Gasoline prices in the Midwest amounted to $3.45, up 0.3% YoY
      • Gasoline prices on the Gulf Coast amounted to $3.15, down (2.7%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.55, down (8.3%) YoY
      • Gasoline prices on the West Coast amounted to $4.36, down (6.2%) YoY
    • Motor gasoline inventories were down by 2.0 million barrels from the prior week
    • Motor gasoline inventories amounted to 229.7 million barrels, up 4.7% YoY
    • Production of motor gasoline averaged 10.30 million bpd, up 1.9% YoY
    • Demand for motor gasoline amounted to 9.398 million bpd, up 7.3% YoY

  • Distillates

    • Distillate inventories decreased by 4.9 million in the week of July 12
    • Total distillate inventories amounted to 124.6 million barrels, up 5.4% YoY
    • Distillate production averaged 5.128 million bpd, up 0.8% YoY
    • Demand for distillates averaged 3.466 million bpd in the week, up 16.7% YoY

  • Natural Gas

    • Natural gas inventories increased by 65 billion cubic feet last week
    • Total natural gas inventories now amount to 3,199 billion cubic feet, up 9.2% YoY

    

Credit News

High yield bond yields decreased 22bps to 7.66% and spreads decreased 4bps to 341bps. Leveraged loan yields decreased 21bps to 9.02% and spreads were flat at 499bps. WTD Leveraged loan returns were positive 18bps. WTD high yield bond returns positive 86bps. 10yr treasury yields increased 15bps to 4.19%. Yields and spreads declined following a very benign June CPI reading and a repricing of Fed expectations with a first Fed cut is expected in September followed by quarterly cuts thereafter.

High-yield:

Week ended 07/12/2024

• 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 07/12/2024

• 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: Vyaire Medical ($339mn, 6/9/24), 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), and New Insight Holdings ($1.2bn, 3/13/24).

CLOs:

Week ended 07/12/2024

• 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:

Source: Federal Housing Finance Industry

• In 2024, U.S. home prices are steadily rising across nearly every state in America
• Overall, home prices rose 6.6% annually as of the first quarter of 2024, the highest increase since 2022
• A combination of low inventory and homeowners’ reluctance to sell is driving up home values as interest rates remain persistently high

Section 2:
30 Year Fixed Mortgage
7/3/24: 6.95

10-year US Treasury
7/3/24: 4.36

Spread
6/28/24: 2.57