U.S. News

PCE Index

• The PCE price index increased by 0.1% in June and was up 2.5% from a year ago, showing a slight decline from the 2.6% annual rate in May
• Core inflation, which excludes food and energy, showed a monthly increase of 0.2% and an annual increase of 2.6%, both in line with expectations
• Personal income rose by 0.2%, below the estimated 0.4%, while spending increased by 0.3%, meeting the forecast. The personal savings rate decreased to 3.4%, the lowest level since November 2022

GDP

• The U.S. GDP grew at an annual rate of 2.8% in the second quarter of 2024
• Consumer spending increased by 2.3%, contributing significantly to GDP growth
• The annual rate of inflation slowed to 2.9% in the second quarter, down from 3.7% in the first quarter

Existing Home Sales

• The median price of an existing home in June 2024 reached a record high of $426,900
• Existing home sales fell for the fourth consecutive month in June, dropping 5.4% to an annual rate of 3.89 million.
• The inventory of unsold homes rose to the highest level in four years, with a 4.1-month supply

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 235,000 in the week ended July 19, down 10,000 from the prior week
• The four-week moving average was 235,500, up 250 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – decreased by 9,000 to 1.851 million in the week ended July 12. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.205 trillion in the week ended July 26, down $2.8 billion from the prior week
• Treasury holdings totaled $4.424 trillion, down $8.2 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.33 trillion in the week, down $1.6 billion from the prior week



Total Public Debt

• Total public debt outstanding was $35.00 trillion as of July 26, an increase of 7.2% from the previous year
• Debt held by the public was $25.75 trillion, and intragovernmental holdings were $7.22 trillion



Inflation Factors

CPI:

• The consumer-price index rose 3.0% in May year over year
• On a monthly basis, the CPI decreased -0.1% in June on a seasonally adjusted basis, after increasing 0.0% in May
• The index for all items less food and energy (core CPI) rose 0.1% in June, after rising 0.2% in May
• Core CPI increased 3.3% for the 12 months ending June

Food and Beverages:

• The food at home index increased 1.1% in June from the same month a year earlier, and increased 0.1% in June month over month
• The food away from home index increased 4.1% in June from the same month a year earlier, and increased 0.4% in June month over month

Commodities:

• The energy commodities index decreased (3.7%) in May after decreasing (3.5%) in
• The energy commodities index fell (2.3%) over the last 12 months
• The energy services index 2.1% in May after increasing 0.3% in May
• The energy services index rose 4.3% over the last 12 months
• The gasoline index rose (2.5%) over the last 12 months
• The fuel oil index fell 0.8% over the last 12 months
• The index for electricity rose 4.4% over the last 12 months
• The index for natural gas fell 3.7% over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index decreased to $5,805.87 per 40ft container for
• Drewry’s composite World Container Index has increased by 268.5% over the last 12 months

Housing Market:

• The shelter index increased 0.2% in June after increasing 0.4% in May
• The rent index increased 0.2% in May after increasing 0.4% in May
• The index for lodging away from home decreased (0.6%) in June after increasing 1.4% in May

Federal Funds Rate

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

World News

• Israel/Gaza

  • Israeli Prime Minister Benjamin Netanyahu received calls for a cease-fire from U.S. leaders, including President Biden, Vice President Harris, and former President Trump, during his U.S. trip
  • Cease-fire negotiations, which have been stalled for months, are set to resume next week in Rome with key officials, including CIA Director William Burns and Israeli spy chief David Barnea
  • Netanyahu faces significant internal political pressure, as members of his far-right coalition have threatened to withdraw their support if he agrees to a cease-fire, potentially destabilizing his government
  • On July 27, 2024, a rocket strike on a soccer field in the Israel-controlled Golan Heights killed 12 young people and injured around 20, with Israel’s military suspecting Hezbollah’s involvement

• Russia

  • Russia’s inflation rate has risen to over 9%, with significant price increases in goods such as potatoes (up 91%) and economy-class flights (up 35%)
  • The Russian central bank raised its benchmark interest rate by 2 percentage points to 18% in an effort to combat inflation, making it one of the few central banks in the world to raise rates this year
  • Three Russian warships, including a training ship, patrol frigate, and refueling tanker, arrived in Havana, Cuba, for the second time in two months, reflecting deepening military ties between Russia and Cuba
  • Ukrainian drone struck a Russian Tu-22M3 strategic supersonic bomber at the Olenya airfield on the Kola Peninsula, marking a significant hit on one of Russia’s key military assets

• France

  • On Friday, saboteurs set fires at three sites on France’s rail network, targeting signaling cables and disrupting high-speed rail services to Paris from the north, southwest, and east, with outages expected to last for days
  • The sabotage occurred just hours before the opening ceremony of the Olympic Games in Paris on the same day, affecting 250,000 travelers immediately and potentially up to 800,000 by the end of the weekend
  • French authorities are investigating possible Russian involvement in the sabotage, as tensions between France and Russia have heightened over the past year due to France’s support for Ukraine

• China

  • The People’s Bank of China cut a key interest rate and injected over $25 billion into the banking system to combat weak growth, heavy debts, and falling prices, reflecting growing concerns about the economy
  • China’s new economic blueprint lacks detailed plans for addressing its local government debt and property crisis, raising concerns among economists about the country’s long-term economic prospects
  • China has stopped participating in the Top500 supercomputing forum, making it harder for the U.S. to gauge China’s progress in supercomputing technology

• Germany

  • The GfK consumer-climate index forecasts German consumer confidence to rise 3.2 points to -18.4 in August 2024, driven by significantly increased income expectations and the positive impact of the European soccer tournament

• New Zealand

  • The ANZ-Roy Morgan consumer confidence index for New Zealand rose 5 points to 87.9 in July 2024, amid rising expectations of significant interest-rate cuts and a notable fall in inflation expectations to 3.7%

• Singapore

  • The Monetary Authority of Singapore maintained its monetary policy settings and expects GDP growth to approach its potential rate of 2%-3% for the full year, supported by improved economic momentum and easing inflation

• Brazil

  • Starlink’s rapid expansion in Brazil, particularly in the Amazon and farming regions, is causing concerns among officials in President Luiz Inácio Lula da Silva’s administration, leading to investigations and potential restrictions due to its perceived political influence and impact on national sovereignty

• EU

  • The EU proposed duties between 12.8% and 36.4% on Chinese biofuels, claiming that it found Chinese companies dumping biofuels into European markets at unfair prices

• Rwanda

  • Rwandan President Kagame won his election on Thursday with more than 99% of the vote, securing Kagame five more years in power. The results come after what international rights groups claim are the erosion of political liberties in Rwanda

• Canada

  • Potential railroad worker strikes at Canadian National Railway and Canadian Pacific Kansas City threaten to disrupt the country’s logistics network. Business groups have warned that simultaneous strikes from the two railroads would cause major disruptions in the supply chain
  • Wildfires reemerge in Western Canada during a heat wave in Alberta. Last year, wildfires burned more than 45 million acres and costed the Canadian economy about $10 billion

• 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

Commodities

• Oil Prices

  • WTI: $77.16 per barrel
    • (3.71%) WoW; +7.69% YTD; (3.66%) YoY
  • Brent: $81.13 per barrel
    • (1.82%) WoW; +5.31% YTD; (3.69%) YoY

• US Production

  • U.S. oil production amounted to 13.3 million bpd for the week ended June 19, down 0.0 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 589, up 3 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 436.5 million barrels, down (4.5%) YoY
    • Refiners operated at a capacity utilization rate of 91.6% for the week, down from 93.7% in the prior week
    • U.S. crude oil imports now amount to 7.037 million barrels per day, down 7.9% YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.51 per gallon in the week of July 26,
      down (5.9%) YoY
      • Gasoline prices on the East Coast amounted to $3.52, down (2.0%) YoY
      • Gasoline prices in the Midwest amounted to $3.51, up 0.8% YoY
      • Gasoline prices on the Gulf Coast amounted to $3.14, down (5.6%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.44, down (11.2%) YoY
      • Gasoline prices on the West Coast amounted to $4.27, down (8.3%) YoY
    • Motor gasoline inventories were down by 5.6 million barrels from the prior week
    • Motor gasoline inventories amounted to 227.4 million barrels, up 4.5% YoY
    • Production of motor gasoline averaged 10.21 million bpd, up 7.6% YoY
    • Demand for motor gasoline amounted to 9.456 million bpd, up (5.8%) YoY

  • Distillates

    • Distillate inventories decreased by -2.8 million in the week of July 26
    • Total distillate inventories amounted to 125.3 million barrels, up 6.2% YoY
    • Distillate production averaged 4.937 million bpd, up 3.3% YoY
    • Demand for distillates averaged 3.861 million bpd in the week, up (3.8%) YoY

  • Natural Gas

    • Natural gas inventories increased by 22 billion cubic feet last week
    • Total natural gas inventories now amount to 3,231 billion cubic feet, up 8.2% YoY

    

Credit News

High yield bond yields increased 2bps to 7.57% and spreads were flat at 332bps. Leveraged loan yields increased 4bps to 8.99% and spreads increased 4bps to 502bps. WTD Leveraged loan returns were positive 7bps. WTD high yield bond returns positive 10bps. 10yr treasury yields decreased 3bps to 4.21%. Yields and spreads increased due to stronger than expected GDP data, improved consumer spending, and mixed earnings season.

High-yield:

Week ended 07/26/2024

• 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 07/26/2024

• 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 07/26/2024

• 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

Diagram V: CMBS Spreads

Freight Rates

Drewry World Container Index

China-Global & Shanghai Export Container Freight Index