U.S. News

S&P Global Flash US Composite PMI

• The Flash US PMI Composite Output Index rose to 55.0 in July, the highest level since April 2022, driven by strong growth in the service sector
• The Flash US Manufacturing PMI fell to 49.5 in July, marking the first decline in manufacturing business conditions in seven months, with drops in new orders, production, and inventories
• The Flash US Services Business Activity Index increased to 56.0 in July, the highest level in 28 months, indicating robust growth in the service sector

New Home Sale

• In July, new-home sales in the U.S. surged by 10.6% to an annualized rate of 739,000, the highest level since May 2023 and well above the expected 620,000
• The median sales price of a new home in July rose to $429,800, up from $416,700 in June
• New-home sales increased the most in the West, rising by 33.8%, and overall, sales are up 5.6% compared to the previous year.

The U.S. Leading Indicators Index

• The U.S. leading indicators index fell by 0.6% in July, marking the fifth consecutive monthly decline
• Economists had expected a smaller decline of 0.4%, indicating a slightly sharper slowdown than anticipated
• Despite the ongoing decline, the index’s six-month annual growth rate no longer signals an impending recession, according to the Conference Board

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 232,000 in the week ended August 16, up 4,000 from the prior week
• The four-week moving average was 236,000, down 750 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 4,000 to 1.864 million in the week ended August 9. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.140 trillion in the week ended August 23, down $37.7 billion from the prior week
• Treasury holdings totaled $4.399 trillion, down $15.0 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.32 trillion in the week, down $1.3 billion from the prior week



Total Public Debt

• Total public debt outstanding was $35.21 trillion as of August 23, an increase of 7.4% from the previous year
• Debt held by the public was $25.92 trillion, and intragovernmental holdings were $7.17 trillion



Inflation Factors

CPI:

• The consumer-price index rose 2.9% in June year over year
• On a monthly basis, the CPI increased 0.2% in July on a seasonally adjusted basis, after decreasing -0.1% in June
• The index for all items less food and energy (core CPI) rose 0.2% in July, after rising 0.1% in June
• Core CPI increased 3.2% for the 12 months ending July

Food and Beverages:

• The food at home index increased 1.1% in July from the same month a year earlier, and increased 0.1% in July month over month
• The food away from home index increased 4.1% in July from the same month a year earlier, and increased 0.2% in July month over month

Commodities:

• The energy commodities index increased 0.1% in July after decreasing (3.7%) in June
• The energy commodities index fell (2.1%) over the last 12 months
• The energy services index (0.0%) in July after increasing 2.1% in June
• The energy services index rose 4.2% over the last 12 months
• The gasoline index rose (2.2%) over the last 12 months
• The fuel oil index fell (0.3%) over the last 12 months
• The index for electricity rose 4.9% over the last 12 months
• The index for natural gas fell 1.5% over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index decreased to $5,319.18 per 40ft container for
• Drewry’s composite World Container Index has increased by 200.8% over the last 12 months

Housing Market:

• The shelter index increased 0.4% in July after increasing 0.2% in June
• The rent index increased 0.3% in May after increasing 0.2% in June
• The index for lodging away from home decreased (0.5%) in June after decreasing (0.6%) in June

Federal Funds Rate

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

World News

• Israel/Gaza

  • Israel’s military conducted pre-emptive strikes on Hezbollah in southern Lebanon with approximately 100 jet fighters, targeting 40 locations after detecting preparations for a major attack on Israel
  • Hezbollah launched over 320 rockets and drones in response to Israel’s strikes, but the attacks resulted in limited impact, with no significant damage reported outside northern Israel
  • The strikes and counterattacks occurred amid ongoing U.S. and regional diplomatic efforts to prevent a broader conflict, with both sides showing some restraint to avoid escalation
  • Palestinians in Gaza are now confined to an area of roughly 15 square miles due to ongoing Israeli military operations, significantly shrinking the space available for safety

• Russia

  • The U.S. Treasury Department imposed new sanctions targeting nearly 400 individuals and entities involved in helping Russia evade existing measures and maintain its military supply chains
  • Ukrainian troops are attempting to encircle approximately 3,000 Russian soldiers in Russia’s Kursk province, using U.S.-supplied HIMARS rocket systems and explosive drones
  • Russian security officials shot dead four Islamist militants who took hostages during a prison uprising in a high-security facility outside Volgograd

• UK

  • The U.K.’s economy showed signs of expansion in August 2024, with the S&P Global Flash PMI Composite Output Index rising to 53.4, up from 52.8 in July. This marks the fastest growth since April 2024
  • Employment growth in the U.K. was robust, reaching its highest rate since June 2023, driven by increased business confidence and efforts to boost business capacity
  • Inflationary pressures eased in August, particularly in the services sector, which is encouraging for the Bank of England as it considers future interest rate adjustments, following the first rate cut in over four years earlier this month

• China

  • The Philippines has anchored its coast guard ship BRP Teresa Magbanua at Sabina Shoal since mid-April to monitor China’s activities, as the area lies within the Philippines’ 200-nautical-mile exclusive economic zone
  • China has demanded that the Philippines withdraw the ship, claiming the shoal as part of its territory, and has responded with aggressive tactics, including ramming and harassing Philippine vessels
  • The escalating tensions at Sabina Shoal highlight the broader struggle between China and the Philippines over control in the South China Sea, with China aiming to solidify its presence and the Philippines attempting to maintain access to contested areas
  • Senior U.S. officials, including Uzra Zeya, met with the Dalai Lama in New York, which triggered a protest from China, as Beijing remains concerned about his succession and control over Tibet

• France

  • French manufacturing sentiment improved in August, rising to 99 from 95 in July, according to a survey by the national statistics agency Insee, driven by better production prospects and foreign order books. However, the sentiment level remains below the long-term average of 100, reflecting ongoing challenges like geopolitical uncertainty and high interest rates

• Canada

  • Almost 10,000 Canadian rail workers will end their work stoppage after the Canada Industrial Relations Board supported a federal government order directing Canadian Pacific Kansas City and Canadian National Railway to resume operations and enter binding arbitration

• Germany

  • German police have detained a 26-year-old Syrian national suspected of carrying out a knife attack in Solingen, which killed three people and wounded eight. Authorities are treating the incident as a terrorist attack claimed by Islamic State

• Africa

  • The World Health Organization stated that the rapid spread of Mpox in Africa constitutes an international health emergency. The virus has moved from eastern Congo to the Central African Republic, Burundi, Uganda, Rwanda, and others. There have been more than 17,000 suspected Mpox infections this year, with about 95% of cases reported in Congo

• Thailand

  • Paetongtarn Shinawatra was named Prime Minister on Friday. She is the daughter of former Prime Minister Thaksin Shinawatra, a billionaire telecoms tycoon who was released from prison this year

• Japan

  • Prime Minister Fumio Kishida announced on Wednesday that he will not seek re-election, amid lowering popularity caused by a political-funds scandal and high inflation

• Greece

  • Parts of Athens have been evacuated as first responders struggle to address wildfires approaching the capital

• Brazil

  • A Voepass twin-engine passenger plane crashed in Vinhedo, Brazil, killing all 62 people on board. Investigators are examining the possibility of ice buildup on the wings, which could have reduced the aircraft’s lift and contributed to the crash.

Commodities

• Oil Prices

  • WTI: $74.83 per barrel
    • (2.37%) WoW; +4.44% YTD; (5.34%) YoY
  • Brent: $79.02 per barrel
    • (0.83%) WoW; +2.57% YTD; (5.21%) YoY

• US Production

  • U.S. oil production amounted to 13.4 million bpd for the week ended August 16, up 0.0 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 585, down 1 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 426.0 million barrels, down (1.7%) YoY
    • Refiners operated at a capacity utilization rate of 92.3% for the week, up from 91.5% in the prior week
    • U.S. crude oil imports now amount to 6.285 million barrels per day, down (4.1%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.36 per gallon in the week of August 23,
      down (12.2%) YoY
      • Gasoline prices on the East Coast amounted to $3.41, down (10.9%) YoY
      • Gasoline prices in the Midwest amounted to $3.40, down (10.3%) YoY
      • Gasoline prices on the Gulf Coast amounted to $3.09, down (12.8%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.59, down (13.6%) YoY
      • Gasoline prices on the West Coast amounted to $4.19, down (16.0%) YoY
    • Motor gasoline inventories were down by 1.6 million barrels from the prior week
    • Motor gasoline inventories amounted to 220.6 million barrels, up 1.4% YoY
    • Production of motor gasoline averaged 9.77 million bpd, up 0.5% YoY
    • Demand for motor gasoline amounted to 9.193 million bpd, up 3.2% YoY

  • Distillates

    • Distillate inventories decreased by -3.3 million in the week of August 23
    • Total distillate inventories amounted to 122.8 million barrels, up 5.2% YoY
    • Distillate production averaged 4.892 million bpd, down (3.4%) YoY
    • Demand for distillates averaged 3.576 million bpd in the week, down (6.8%) YoY

  • Natural Gas

    • Natural gas inventories increased by 35 billion cubic feet last week
    • Total natural gas inventories now amount to 3,299 billion cubic feet, up 7.0% YoY

    

Credit News

High yield bond yields decreased 14bps to 7.33% and spreads decreased 7bps to 351bps. Leveraged loan yields decreased 12bps to 8.53% and spreads decreased 4bps to 499bps. WTD Leveraged loan returns were positive 23bps. WTD high yield bond returns were positive 61bps. 10yr treasury yields decreased 6bps to 3.86%. Yields and spreads declined amid a Goldilocks narrative of growth without inflation. Capital market activity stalled until post Labor Day. 2Q earnings managed to match elevated consensus.

High-yield:

Week ended 08/23/2024

• 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 08/23/2024

• 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 08/23/2024

• 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