U.S. News
- Consumer Confidence
- Consumer confidence rose to 100.3 in July, up from 97.8 in June and above the median forecast of 99.5
- Americans’ short-term expectations for income, business and the job market rose to 78.2 from 72.8 in June
- Increased prices on food are the main drivers of consumers’ view of the economy
- FOMC Interest-Rate Decision
- The Federal Reserve held its benchmark rate, which is at a 23-year high
- The Federal Reserve is monitoring job-market indicators, as job gains slow and unemployment rises
- The Federal Reserve’s goal is to get inflation below 2%; however, top officials have made it clear that, so long as inflation continues to trend downwards, a rate cut in September is on the table even if this target is not met
- Factory Orders
- Factory orders fell 3.3% in June, a greater decrease than the forecasted 3.2%. The drop was mostly caused by lower demand for aircraft—both passenger planes and military aircraft Excluding transportation, factory orders increased 0.1%
- Core orders increased by 0.9% in June, but business investment has hardly increased in the last year
- Weak shipments this year are mostly due to high interest rates and moderating demand for big-ticket goods, such as new cars
- Jobless Claims
- Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 249,000 in the week ended July 26, up 14,000 from the prior week
- The four-week moving average was 238,000, up 2500 from the prior week
- Continuing claims – those filed by workers unemployed for longer than a week – increased by 33,000 to 1.877 million in the week ended July 19. This figure is reported with a one-week lag
- Fed’s Balance Sheet
- The Federal Reserve’s assets totaled $7.178 trillion in the week ended August 2, down $27.1 billion from the prior week
- Treasury holdings totaled $4.422 trillion, down $1.3 billion from the prior week
- Holdings of mortgage-backed securities (MBS) were $2.32 trillion in the week, down $17.8 billion from the prior week
- Total Public Debt
- Total public debt outstanding was $35.06 trillion as of August 2, an increase of 7.5% from the previous year
- Debt held by the public was $25.76 trillion, and intragovernmental holdings were $7.22 trillion
- Inflation Factors
- CPI:
- The consumer-price index rose 3.0% in June 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 $5,736.21 per 40ft container for
- Drewry’s composite World Container Index has increased by 225.7% 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
- Israel claims that it killed Fuad Shukr, a top Hezbollah military leader, in an airstrike in Beirut. The attack was retaliation for a Saturday attack on the Golan heights, which killed 12 young people
- A strike on Tehran killed Ismail Haniyeh, a Hamas negotiator and voice for a cease-fire. Haniyeh is the highest-ranking Hamas political official to be killed in this conflict
- Iranian investigations revealed that a bomb was planted in the negotiator’s room, highlighting failure of Iranian security. Iran announced that retaliation for the attack on its soil will be “heavy and swift”, raising concerns of further escalation in the region
- Israel announced that it killed Mohammed Deif, a top Hamas military commander, in a July airstrike. Mohammed Deif was a principal planner of the October 7th attacks and has been a designated terrorist by the U.S. government for decades
-
Russia
- Ukraine claims that it sunk a Russian Rostov-on-Don submarine in a missile strike off the coast of Crimea. This would mark the first time that one of these vessels in the Black Sea Fleet has been sunk
- Russian television will not air the Olympic games for the first time in four decades. The Russian government criticized the Olympic committee for banning the Russian team
- Western governments coordinated the largest prisoner swap with Russia since the Cold War. Russia released 16 people, including WSJ reporter Evan Gershkovich and other journalists and activists. In return, Russia will receive 8 people, including hitmen, spies, weapons smugglers, and hackers. Putin greeted them when they landed on Russian soil, thanking them for their “loyalty to the motherland”
- There are still approximately 20 U.S. citizens who are still held by Russia, who could be used as potential bargaining chips in future prisoner exchanges
-
France
- French officials stated that far-left saboteurs were responsible for the burning of rail lines that impacted the country’s high-speed train network during the Olympics
- In addition to the rail lines, the far-left is also connected to the vandalism of fiber-optic networks, disrupting landline and cellular service. Whether the saboteurs acted on their own accord or were influenced by outside groups is currently being investigated
- Thomas Jolly, the artistic director behind the Opening Ceremony, filed a complaint regarding threatening messages, including death threats, after the Opening Ceremony came under criticism from conservative politicians and Christian religious groups
- While critics lamented the reinterpretation of Leonardo da Vinci’s “The Last Supper” for being distasteful and offensive, Jolly claimed that the scene was meant to be a representation of the Greek gods
-
China
- During the Politburo meeting, Chinese leaders pledged more measures to boost household income, increase consumer demand, and reduce funding costs for companies
- This announcement comes after Chinese economic growth slowed sharply during the second quarter, driven mainly by low consumer spending and a sluggish property sector
- Russian and Chinese militaries conducted a joint patrol near Alaska. U.S. and Canadian fighters intercepted the Russian and Chinese bombers, though they did not enter U.S. airspace. This patrol marks the first such cooperation between the two countries
- China rejected the IMF’s proposal to use $1T of central government funds to complete unfinished housing. The news comes as a disappointment to those who hoped for more forceful support to an industry that has been dragging down the Chinese economy
-
UK
- The U.K. government cancels the retail sale of its 20% NatWest stake, a bank it rescued during the 2008 financial crisis. The U.K. Treasury Chief announced that the government plans to sell the stake privately in 2025
-
Venezuela
- The U.S. recognized Edmundo Gonzalez, Nicolas Maduro’s opponent, as the winner of the country’s disputed presidential election. President Maduro continues to stay in power, using the police and military to cement his position
-
Mali
- Dozens of Russian / Wagner Group mercenaries, hired by the Malian government to fight insurgents, were killed in an attack conducted by Tuareg rebels on Sunday. The attack dealt a blow to the image of Wagner Group and the Russian presence in the region
-
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
Commodities
-
Oil Prices
- WTI: $73.52 per barrel
- (4.72%) WoW; +2.61% YTD; (9.85%) YoY
- Brent: $77.52 per barrel
- (4.45%) WoW; +0.62% YTD; (8.95%) YoY
-
US Production
- U.S. oil production amounted to 13.3 million bpd for the week ended July 26, down 0.0 million bpd
from the prior week
-
Rig Count
- The total number of oil rigs amounted to 586, down 3 from last week
-
Inventories
-
Crude Oil
- Total U.S. crude oil inventories now amount to 433.0 million barrels, down (1.5%) YoY
- Refiners operated at a capacity utilization rate of 90.1% for the week, down from 91.6% in the prior week
- U.S. crude oil imports now amount to 6.871 million barrels per day, down 4.3% YoY
-
Gasoline
- Retail average regular gasoline prices amounted to $3.48 per gallon in the week of August 2,
down (9.1%) YoY
- Gasoline prices on the East Coast amounted to $3.50, down (6.5%) YoY
- Gasoline prices in the Midwest amounted to $3.56, down (3.5%) YoY
- Gasoline prices on the Gulf Coast amounted to $3.19, down (8.9%) YoY
- Gasoline prices in the Rocky Mountain region amounted to $3.51, down (12.1%) YoY
- Gasoline prices on the West Coast amounted to $4.23, down (10.6%) YoY
- Motor gasoline inventories were down by 3.7 million barrels from the prior week
- Motor gasoline inventories amounted to 223.8 million barrels, up 2.1% YoY
- Production of motor gasoline averaged 10.01 million bpd, up 1.8% YoY
- Demand for motor gasoline amounted to 9.250 million bpd, up 4.7% YoY
-
Distillates
- Distillate inventories decreased by 1.5 million in the week of August 2
- Total distillate inventories amounted to 126.8 million barrels, up 8.3% YoY
- Distillate production averaged 4.980 million bpd, up 2.4% YoY
- Demand for distillates averaged 3.725 million bpd in the week, down (2.6%) YoY
-
Natural Gas
- Natural gas inventories increased by 18 billion cubic feet last week
- Total natural gas inventories now amount to 3,249 billion cubic feet, up 8.3% YoY
Credit News
High yield bond yields decreased 2bps to 7.55% and spreads increased 27bps to 359bps. Leveraged loan yields decreased 32bps to 8.67% and spreads decreased 8bps to 494bps. WTD Leveraged loan returns were positive 14bps. WTD high yield bond returns positive 23bps. 10yr treasury yields decreased 28bps to 3.98%. Yields and spreads decreased due to a string of weak labor market data, higher unemployment rate, Fed’s long-awaited rate cut decision, and weak earnings season so far.
High-yield:
Week ended 08/02/2024
- 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 08/02/2024
- 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: 2U ($374mn, 7/25/24), Rodan & Fields ($763mn, 7/11/24), Wheel Pros ($2.8bn, 7/11/24), Quorum Health Group ($688mn, 7/10/24), Vyaire Medical ($339mn, 6/9/24), 99 Cents Only Stores ($350mn, 4/7/24), and ConvergeOne ($1.3bn, 4/4/24).
CLOs:
Week ended 08/02/2024
- 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
Real Estate
Section 1:
Values of Old Office Towers Go to Near-Zero, but the Land Has Value
23-Floor Manhattan Office Building Just Sold at a 97.5% Discount:
- In 2006, an investment fund managed by a division of UBS bought a 925,000-square-foot office tower at 135 West 50th Street in Manhattan for $332 million (leasehold interest only, not the land).
- In 2006, UBS purchased the land (ground lease) for $279 million.
- In 2019, UBS sold the land to Safehold for $285 million and established a long-term ground lease with them.
- UBS retained the building to earn income from office rents, which were expected to increase significantly due to an “office shortage” in Manhattan.
- UBS renovated the building with construction finishing in 2021, spending $76 million on the renovation. The building was about 40% leased at that time.
- The office commercial real estate market began collapsing due to the work-from-home trend and increased vacant office space. The building’s occupancy decreased to 35%, and office rents did not cover the ground lease costs, turning the property into a financial burden.
- UBS attempted to sell the office tower, but a deal fell through, leading to an online auction sale for $8.5 million.
- UBS’s total proceeds from the property were $8.5 million from the building sale and $285 million from the land sale, totaling $293.5 million.
- The total loss amounted to $393.5 million (57% loss on investment) after accounting for the purchase and renovation costs.
- On the financial statement, the loss on the building appeared smaller due to depreciation rules, showing a combined accounting loss of $168 million.
- A similar ground-lease situation in Chicago involved a 12-story, 50% vacant office tower at 300 W. Adams St., sold for $4 million after foreclosure, while the original owner retained the land and continued collecting rent.
Source: Wolfstreet
Section 2:
30 Year Fixed Mortgage
8/1/24: 6.73
10-year US Treasury
8/1/24: 43.99
Spread
8/1/24: 2.61
Freight Rates
Drewry World Container Index
China-Global & Shanghai Export Container Freight Index
U.S. News
- Consumer Confidence
- Consumer confidence rose to 100.3 in July, up from 97.8 in June and above the median forecast of 99.5
- Americans’ short-term expectations for income, business and the job market rose to 78.2 from 72.8 in June
- Increased prices on food are the main drivers of consumers’ view of the economy
- FOMC Interest-Rate Decision
- The Federal Reserve held its benchmark rate, which is at a 23-year high
- The Federal Reserve is monitoring job-market indicators, as job gains slow and unemployment rises
- The Federal Reserve’s goal is to get inflation below 2%; however, top officials have made it clear that, so long as inflation continues to trend downwards, a rate cut in September is on the table even if this target is not met
- Factory Orders
- Factory orders fell 3.3% in June, a greater decrease than the forecasted 3.2%. The drop was mostly caused by lower demand for aircraft—both passenger planes and military aircraft Excluding transportation, factory orders increased 0.1%
- Core orders increased by 0.9% in June, but business investment has hardly increased in the last year
- Weak shipments this year are mostly due to high interest rates and moderating demand for big-ticket goods, such as new cars
- Jobless Claims
- Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 249,000 in the week ended July 26, up 14,000 from the prior week
- The four-week moving average was 238,000, up 2500 from the prior week
- Continuing claims – those filed by workers unemployed for longer than a week – increased by 33,000 to 1.877 million in the week ended July 19. This figure is reported with a one-week lag
- Fed’s Balance Sheet
- The Federal Reserve’s assets totaled $7.178 trillion in the week ended August 2, down $27.1 billion from the prior week
- Treasury holdings totaled $4.422 trillion, down $1.3 billion from the prior week
- Holdings of mortgage-backed securities (MBS) were $2.32 trillion in the week, down $17.8 billion from the prior week
- Total Public Debt
- Total public debt outstanding was $35.06 trillion as of August 2, an increase of 7.5% from the previous year
- Debt held by the public was $25.76 trillion, and intragovernmental holdings were $7.22 trillion
- Inflation Factors
- CPI:
- The consumer-price index rose 3.0% in June 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 $5,736.21 per 40ft container for
- Drewry’s composite World Container Index has increased by 225.7% 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
- Israel claims that it killed Fuad Shukr, a top Hezbollah military leader, in an airstrike in Beirut. The attack was retaliation for a Saturday attack on the Golan heights, which killed 12 young people
- A strike on Tehran killed Ismail Haniyeh, a Hamas negotiator and voice for a cease-fire. Haniyeh is the highest-ranking Hamas political official to be killed in this conflict
- Iranian investigations revealed that a bomb was planted in the negotiator’s room, highlighting failure of Iranian security. Iran announced that retaliation for the attack on its soil will be “heavy and swift”, raising concerns of further escalation in the region
- Israel announced that it killed Mohammed Deif, a top Hamas military commander, in a July airstrike. Mohammed Deif was a principal planner of the October 7th attacks and has been a designated terrorist by the U.S. government for decades
-
Russia
- Ukraine claims that it sunk a Russian Rostov-on-Don submarine in a missile strike off the coast of Crimea. This would mark the first time that one of these vessels in the Black Sea Fleet has been sunk
- Russian television will not air the Olympic games for the first time in four decades. The Russian government criticized the Olympic committee for banning the Russian team
- Western governments coordinated the largest prisoner swap with Russia since the Cold War. Russia released 16 people, including WSJ reporter Evan Gershkovich and other journalists and activists. In return, Russia will receive 8 people, including hitmen, spies, weapons smugglers, and hackers. Putin greeted them when they landed on Russian soil, thanking them for their “loyalty to the motherland”
- There are still approximately 20 U.S. citizens who are still held by Russia, who could be used as potential bargaining chips in future prisoner exchanges
-
France
- French officials stated that far-left saboteurs were responsible for the burning of rail lines that impacted the country’s high-speed train network during the Olympics
- In addition to the rail lines, the far-left is also connected to the vandalism of fiber-optic networks, disrupting landline and cellular service. Whether the saboteurs acted on their own accord or were influenced by outside groups is currently being investigated
- Thomas Jolly, the artistic director behind the Opening Ceremony, filed a complaint regarding threatening messages, including death threats, after the Opening Ceremony came under criticism from conservative politicians and Christian religious groups
- While critics lamented the reinterpretation of Leonardo da Vinci’s “The Last Supper” for being distasteful and offensive, Jolly claimed that the scene was meant to be a representation of the Greek gods
-
China
- During the Politburo meeting, Chinese leaders pledged more measures to boost household income, increase consumer demand, and reduce funding costs for companies
- This announcement comes after Chinese economic growth slowed sharply during the second quarter, driven mainly by low consumer spending and a sluggish property sector
- Russian and Chinese militaries conducted a joint patrol near Alaska. U.S. and Canadian fighters intercepted the Russian and Chinese bombers, though they did not enter U.S. airspace. This patrol marks the first such cooperation between the two countries
- China rejected the IMF’s proposal to use $1T of central government funds to complete unfinished housing. The news comes as a disappointment to those who hoped for more forceful support to an industry that has been dragging down the Chinese economy
-
UK
- The U.K. government cancels the retail sale of its 20% NatWest stake, a bank it rescued during the 2008 financial crisis. The U.K. Treasury Chief announced that the government plans to sell the stake privately in 2025
-
Venezuela
- The U.S. recognized Edmundo Gonzalez, Nicolas Maduro’s opponent, as the winner of the country’s disputed presidential election. President Maduro continues to stay in power, using the police and military to cement his position
-
Mali
- Dozens of Russian / Wagner Group mercenaries, hired by the Malian government to fight insurgents, were killed in an attack conducted by Tuareg rebels on Sunday. The attack dealt a blow to the image of Wagner Group and the Russian presence in the region
-
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
Commodities
-
Oil Prices
- WTI: $73.52 per barrel
- (4.72%) WoW; +2.61% YTD; (9.85%) YoY
- Brent: $77.52 per barrel
- (4.45%) WoW; +0.62% YTD; (8.95%) YoY
-
US Production
- U.S. oil production amounted to 13.3 million bpd for the week ended July 26, down 0.0 million bpd
from the prior week
-
Rig Count
- The total number of oil rigs amounted to 586, down 3 from last week
-
Inventories
-
Crude Oil
- Total U.S. crude oil inventories now amount to 433.0 million barrels, down (1.5%) YoY
- Refiners operated at a capacity utilization rate of 90.1% for the week, down from 91.6% in the prior week
- U.S. crude oil imports now amount to 6.871 million barrels per day, down 4.3% YoY
-
Gasoline
- Retail average regular gasoline prices amounted to $3.48 per gallon in the week of August 2,
down (9.1%) YoY
- Gasoline prices on the East Coast amounted to $3.50, down (6.5%) YoY
- Gasoline prices in the Midwest amounted to $3.56, down (3.5%) YoY
- Gasoline prices on the Gulf Coast amounted to $3.19, down (8.9%) YoY
- Gasoline prices in the Rocky Mountain region amounted to $3.51, down (12.1%) YoY
- Gasoline prices on the West Coast amounted to $4.23, down (10.6%) YoY
- Motor gasoline inventories were down by 3.7 million barrels from the prior week
- Motor gasoline inventories amounted to 223.8 million barrels, up 2.1% YoY
- Production of motor gasoline averaged 10.01 million bpd, up 1.8% YoY
- Demand for motor gasoline amounted to 9.250 million bpd, up 4.7% YoY
-
Distillates
- Distillate inventories decreased by 1.5 million in the week of August 2
- Total distillate inventories amounted to 126.8 million barrels, up 8.3% YoY
- Distillate production averaged 4.980 million bpd, up 2.4% YoY
- Demand for distillates averaged 3.725 million bpd in the week, down (2.6%) YoY
-
Natural Gas
- Natural gas inventories increased by 18 billion cubic feet last week
- Total natural gas inventories now amount to 3,249 billion cubic feet, up 8.3% YoY
Credit News
High yield bond yields decreased 2bps to 7.55% and spreads increased 27bps to 359bps. Leveraged loan yields decreased 32bps to 8.67% and spreads decreased 8bps to 494bps. WTD Leveraged loan returns were positive 14bps. WTD high yield bond returns positive 23bps. 10yr treasury yields decreased 28bps to 3.98%. Yields and spreads decreased due to a string of weak labor market data, higher unemployment rate, Fed’s long-awaited rate cut decision, and weak earnings season so far.
High-yield:
Week ended 08/02/2024
- 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 08/02/2024
- 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: 2U ($374mn, 7/25/24), Rodan & Fields ($763mn, 7/11/24), Wheel Pros ($2.8bn, 7/11/24), Quorum Health Group ($688mn, 7/10/24), Vyaire Medical ($339mn, 6/9/24), 99 Cents Only Stores ($350mn, 4/7/24), and ConvergeOne ($1.3bn, 4/4/24).
CLOs:
Week ended 08/02/2024
- 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
Real Estate
Section 1:
Values of Old Office Towers Go to Near-Zero, but the Land Has Value
23-Floor Manhattan Office Building Just Sold at a 97.5% Discount:
- In 2006, an investment fund managed by a division of UBS bought a 925,000-square-foot office tower at 135 West 50th Street in Manhattan for $332 million (leasehold interest only, not the land).
- In 2006, UBS purchased the land (ground lease) for $279 million.
- In 2019, UBS sold the land to Safehold for $285 million and established a long-term ground lease with them.
- UBS retained the building to earn income from office rents, which were expected to increase significantly due to an “office shortage” in Manhattan.
- UBS renovated the building with construction finishing in 2021, spending $76 million on the renovation. The building was about 40% leased at that time.
- The office commercial real estate market began collapsing due to the work-from-home trend and increased vacant office space. The building’s occupancy decreased to 35%, and office rents did not cover the ground lease costs, turning the property into a financial burden.
- UBS attempted to sell the office tower, but a deal fell through, leading to an online auction sale for $8.5 million.
- UBS’s total proceeds from the property were $8.5 million from the building sale and $285 million from the land sale, totaling $293.5 million.
- The total loss amounted to $393.5 million (57% loss on investment) after accounting for the purchase and renovation costs.
- On the financial statement, the loss on the building appeared smaller due to depreciation rules, showing a combined accounting loss of $168 million.
- A similar ground-lease situation in Chicago involved a 12-story, 50% vacant office tower at 300 W. Adams St., sold for $4 million after foreclosure, while the original owner retained the land and continued collecting rent.
Source: Wolfstreet
Section 2:
30 Year Fixed Mortgage
8/1/24: 6.73
10-year US Treasury
8/1/24: 43.99
Spread
8/1/24: 2.61
Freight Rates
Drewry World Container Index
China-Global & Shanghai Export Container Freight Index