U.S. News

GDP

• The U.S. economy grew at a 3% annual pace in the second quarter, higher than the forecasted 2.8% and higher than the first quarter’s 1.4% growth rate
• The higher than expected growth was driven primarily by better than anticipated consumer spending, according to the Commerce Department
• Pre-tax corporate profits rose 1.7%, reversing a 1.4% drop in the first quarter

U.S. Consumer Confidence

• The consumer confidence index reached 103.3 in August, up from 101.9 in July. The result is above the forecasted figure of 101.0
• The August figure is the highest reading since February
• According to economists, the boost in consumer confidence may be caused by the prospects of a rate cut from the Federal Reserve and the slowdown of inflation

PCE Index

• The PCE index was up 2.5% in July from one year ago, meeting forecasts. The core index rose 2.6%, also meeting forecasts
• Real disposable personal income increased 0.1% from the previous month, the same increase as was recorded in June
• This news, coupled with lackluster job creation in July, may push the Federal Reserve further toward rate cuts

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 231,000 in the week ended August 23, down 2,000 from the prior week
• The four-week moving average was 231,500, down 4750 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 13,000 to 1.868 million in the week ended August 16. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.123 trillion in the week ended August 30, down $16.7 billion from the prior week
• Treasury holdings totaled $4.399 trillion, up $0.0 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.31 trillion in the week, down $10.2 billion from the prior week



Total Public Debt

• Total public debt outstanding was $35.28 trillion as of August 30, an increase of 7.2% from the previous year
• Debt held by the public was $25.04 trillion, and intragovernmental holdings were $7.17 trillion



Inflation Factors

CPI:

• The consumer-price index rose 2.9% in July 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 $5,181.21 per 40ft container for
• Drewry’s composite World Container Index has increased by 197.8% 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

  • The Israeli military retrieved six more dead hostages from Gaza on Saturday, including American-Israeli Hersh Goldberg-Polin. The increasing death toll on hostages puts added pressure on Benjamin Netanyahu to negotiate a cease-fire that could bring the remaining hostages back home safely
  • On Tuesday, the Israeli military launched a ground-and-air operation in the West Bank, to address terror attacks in the region. Palestinian militants attempted two car bomb attacks in the West Bank against Israeli civilians, but these were stopped by the Israeli military
  • On Sunday, Hezbollah chief Hassan Nasrallah indicated that the group had concluded its retaliation against Israel for the killing of Fuad Shukr. This may signal that Hezbollah does not wish to further escalate the conflict into a regional war

• Russia

  • Telegram founder Pavel Durov was arrested by French authorities, as Telegram is under investigation into whether its platform enables online criminality
  • Russia has expressed concern that Western governments may entice Durov to crack Telegram’s encrypted communications, which Moscow has used in the past for military and espionage activities. The transmission of intelligence, the targeting of artillery, and the broadcasting of drone feeds, among other channels of communication, are conducted through Telegram
  • Russia launched one of its largest aerial attacks against Ukraine, a two-day barrage of both missiles and drones that targeted several cities across Ukraine

• Middle East

  • The United Nations atomic agency warned that Iran has continued to expand its stockpile of near weapons-grade uranium in recent months
  • Iranian officials stated that they have acquired most of the knowledge needed to build a nuclear weapon, and the country may drop its official stance that it would never pursue weapons of mass destruction
  • An oil tanker that was attacked by the Houthis is at risk of leaking oil into the Red Sea. The U.N. warns that the tanker is carrying a million barrels, and a leak could devastate the environment and wreak havoc on the Red Sea coasts
  • If the tanker leaks, it risks becoming the fifth largest oil spill of all time

• China

  • Chinese manufacturing activity declined for a fourth straight month in August, further signaling weakness in the Chinese economy
  • According to the statistics bureau, the decrease was partly driven by weather conditions (high temperatures and heavy rains), as well as the offseason for some industries
  • Transactions at China’s top 100 real estate developers dropped 26.8% year-over-year to 251.2 billion yuan in August, showing that the property sector remains a concern for Beijing
  • Japan announced that a Chinese military plane violated its airspace for the first time. In response, Japan announced a planned multibillion-dollar satellite network to monitor ships and military sites

• 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

  • The Teamsters union is challenging the court order that forced 10,000 Canadian rail workers to resume work. Originally, the union planned to strike against National Railway and Canadian Pacific Kansas City, which would have shut down operations and risked damaging the country’s economy

• Mexico

  • President Andres Manuel Lopez Obrador is proposing a judicial overhaul that would require all federal judges, including Supreme Court judges, to face elections in 2025 and 2027. The move has caused thousands of judges and court workers to go on strike

• 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
  • The German far right AfD is set to win key elections in Eastern Germany. This would mark the first state election win for a far-right party in Germany since the end of World War II

• 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

• 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: $73.55 per barrel
    • (1.71%) WoW; +2.65% YTD; (12.05%) YoY
  • Brent: $78.80 per barrel
    • (0.28%) WoW; +2.28% YTD; (9.28%) YoY

• US Production

  • U.S. oil production amounted to 13.3 million bpd for the week ended August 23, down 0.0 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 583, down 2 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 425.2 million barrels, up 0.5% YoY
    • Refiners operated at a capacity utilization rate of 93.3% for the week, up from 92.3% in the prior week
    • U.S. crude oil imports now amount to 6.652 million barrels per day, down (0.9%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.34 per gallon in the week of August 30,
      down (12.5%) YoY
      • Gasoline prices on the East Coast amounted to $3.37, down (11.0%) YoY
      • Gasoline prices in the Midwest amounted to $3.29, down (11.4%) YoY
      • Gasoline prices on the Gulf Coast amounted to $2.99, down (13.7%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.47, down (15.1%) YoY
      • Gasoline prices on the West Coast amounted to $4.18, down (16.3%) YoY
    • Motor gasoline inventories were down by 2.2 million barrels from the prior week
    • Motor gasoline inventories amounted to 218.4 million barrels, up 0.5% YoY
    • Production of motor gasoline averaged 9.61 million bpd, down (3.9%) YoY
    • Demand for motor gasoline amounted to 9.307 million bpd, up 2.6% YoY

  • Distillates

    • Distillate inventories decreased by 0.3 million in the week of August 30
    • Total distillate inventories amounted to 123.1 million barrels, up 4.4% YoY
    • Distillate production averaged 5.002 million bpd, down (0.4%) YoY
    • Demand for distillates averaged 3.822 million bpd in the week, up 3.2% YoY

  • Natural Gas

    • Natural gas inventories increased by 35 billion cubic feet last week
    • Total natural gas inventories now amount to 3,334 billion cubic feet, up 7.0% YoY

    

Credit News

High yield bond yields decreased 12bps to 7.21% and spreads decreased 5bps to 345bps. Leveraged loan yields decreased 10bps to 8.43% and spreads decreased 4bps to 495bps. WTD Leveraged loan returns were positive 23bps. WTD high yield bond returns were positive 43bps. 10yr treasury yields increased 2bps to 3.88%. US real GDP growth for 2Q was revised higher to 3% driven by a large upward revision in real PCE to 2.9% from 2.3%, whereas jobless claims remained stable and were not suggestive of any sudden shift in labor market conditions.

High-yield:

Week ended 08/30/2024

• 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 08/30/2024

• 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 08/30/2024

• 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