U.S. News

FOMC Interest Rate Decision

• The Federal Reserve cut its benchmark interest rate by 50 basis points, marking its first rate reduction since 2020, bringing the rate to a range between 4.75% and 5%
• The decision was aimed at preventing a cooling labor market from worsening, with 11 of 12 Fed voters backing the larger-than-expected cut
• Projections indicate further rate cuts, with Fed officials expecting at least two more reductions by the end of 2025, aiming to stabilize inflation and maintain employment

U.S. Retail Sales

• Total retail and food services sales for August were $710.8 billion, up 0.1% from July 2024 and 2.1% higher than Aug’ 2023
• Nonstore retailers saw a significant YoY increase of 7.8%, while food services and drinking places were up 2.7% from Aug’ 2023
• Retail sales for the June-August 2024 period were 2.3% higher than the same period in 2023

Housing Starts

• U.S. housing starts rose by 9.6% in August, marking the largest increase in six months, reaching a pace of 1.36 million new homes annually
• Single-family home construction surged by 15.8%, while multi-family housing starts, such as apartments, fell by 6.7%
• Building permits, a leading indicator of future construction, increased by 4.9%, signaling potential continued growth, with permits for townhomes and multi-unit structures up by 16.3%

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 219,000 in the week ended September 13, down 12,000 from the prior week
• The four-week moving average was 227,500, down 3500 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – decreased by 14,000 to 1.829 million in the week ended September 6. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.109 trillion in the week ended September 20, down $5.9 billion from the prior week
• Treasury holdings totaled $4.387 trillion, down $2.0 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.30 trillion in the week, down $0.0 billion from the prior week



Total Public Debt

• Total public debt outstanding was $35.33 trillion as of September 20, an increase of 6.7% from the previous year
• Debt held by the public was $26.26 trillion, and intragovernmental holdings were $7.09 trillion



Inflation Factors

CPI:

• The consumer-price index rose 2.5% in August year over year
• On a monthly basis, the CPI increased 0.2% in August on a seasonally adjusted basis, after increasing 0.2% in June
• The index for all items less food and energy (core CPI) rose 0.3% in August, after rising 0.2% in July
• Core CPI increased 3.2% for the 12 months ending August

Food and Beverages:

• The food at home index increased 0.9% in August from the same month a year earlier, and increased 0.0% in August month over month
• The food away from home index increased 4.0% in August from the same month a year earlier, and increased 0.3% in August month over month

Commodities:

• The energy commodities index decreased (0.6%) in August after increasing 0.1% in July
• The energy commodities index fell (10.2%) over the last 12 months
• The energy services index (0.8%) in August after decreasing (0.0%) in June
• The energy services index rose 3.1% over the last 12 months
• The gasoline index rose (10.3%) over the last 12 months
• The fuel oil index fell (12.1%) over the last 12 months
• The index for electricity rose 3.9% over the last 12 months
• The index for natural gas fell (0.1%) over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index decreased to $3,970.49 per 40ft container for
• Drewry’s composite World Container Index has increased by 168.4% over the last 12 months

Housing Market:

• The shelter index increased 0.5% in August after increasing 0.4% in July
• The rent index increased 0.5% in August after increasing 0.3% in July
• The index for lodging away from home decreased (0.7%) in August after decreasing (0.5%) in June

Federal Funds Rate

• The effective Federal Funds Rate is at 4.83%, down (0.50%) year to date

World News

• Middle East

  • Israeli airstrikes in southern Beirut killed 16 Hezbollah fighters, including top military commander Ibrahim Aqil and senior members of the elite Radwan force
  • Explosions of pagers and walkie-talkies carried by Hezbollah members injured thousands, with over 2,000 surgeries performed. Investigations revealed a complex supply chain involving companies in Taiwan, Hungary, and Bulgaria, with Israeli operatives likely sabotaging the devices by planting explosives in their batteries
  • The U.S. and Iraq have reached an agreement to withdraw the majority of American and coalition troops by the end of 2026, starting with the departure of hundreds of U.S. troops from Baghdad and western Iraq by September 2025, followed by a withdrawal from Erbil by the end of 2026. The plan is part of a larger effort to curtail the U.S.’s two-decade military presence in Iraq
  • Despite the planned withdrawal, a small contingent of U.S. forces may remain beyond 2026 under a new bilateral security agreement. These troops would provide advisory support and logistical assistance, particularly to help U.S. forces stationed in neighboring Syria and to continue operations against the Islamic State

• Russia

  • Ukrainian President Volodymyr Zelenskyy stated that Ukraine’s “victory plan” depends on swift decisions from allies this year, particularly for air defense, energy, and weapons purchases
  • Russia has charged four of its soldiers in Ukraine with torturing and killing a US citizen, Russell Bentley, who fought for pro-Moscow forces
  • The EU will grant a loan of up to 35 billion euros ($39.06bn) to Ukraine, announced by EU Commission president Ursula von der Leyen during her visit to Kyiv. The loan is part of a wider G7 plan to raise funds using proceeds from frozen Russian assets
  • Ukraine’s air force reported downing 61 out of 70 Russian drones and one missile during overnight attacks across multiple regions, including Kyiv and Odesa

• France

  • France’s new Prime Minister, Michel Barnier, has formed his cabinet, appointing mostly centrist ministers from President Macron’s ranks despite recent parliamentary losses
  • Barnier appointed Antoine Armand as finance minister and Jean-Noël Barrot as foreign minister, while retaining Sébastien Lecornu as defense minister
  • The survival of the new government depends on the far-right National Rally, led by Marine Le Pen, which has 126 seats in the National Assembly and may support a no-confidence vote led by the left-wing coalition

• UK

  • The U.K.’s annual inflation rate remained steady at 2.2% in August 2024, matching July’s rate
  • Services inflation increased to 5.6% from 5.2% in July, driven largely by a sharp rise in airfares, which grew at the second-fastest pace on record
  • The Bank of England is expected to maintain its key interest rate at 5% but may consider cutting rates later in the year due to concerns about persistent inflation and rapid wage growth in the services sector

• Japan

  • Japan’s exports grew by 5.6%, significantly lower than the 10.2% increase recorded in July and below the 10.6% forecast by economists. The decline was driven by weaker overseas demand for cars and machinery for construction and mining, although shipments of chip-making machines and electronic parts saw an uptick

• India

  • India’s inflation rose slightly to 3.65% in August 2024, up from 3.6% in July, slightly above expectations. The Reserve Bank of India remains cautious about rising food prices affecting other sectors, with rural inflation at 4.2% and urban inflation at 3.1%

• Venezuela

  • Venezuela’s government has detained three Americans, including a U.S. Navy serviceman, on allegations of coup plotting, despite previous commitments to halt such detentions, highlighting renewed tensions between Caracas and Washington

• Mali

  • Al Qaeda militants attacked a military air base in Bamako, Mali, marking their first assault on the capital in years and targeting both Malian forces and Russian mercenaries stationed there

• Taiwan

  • Taiwan faces delays in U.S. weapons shipments due to strains on the American defense industry, heightened by the wars in Gaza and Ukraine, raising concerns about Taiwan’s ability to stockpile arms in the event of a conflict with China

• Brazil

  • X (formerly Twitter), owned by Elon Musk, has started complying with Brazilian Supreme Court requirements by hiring legal representation in Brazil, a key step toward lifting the ban imposed for failing to block certain accounts, but the court requests further proof before restoring access to the platform

• Thailand

  • Paetongtarn Shinawatra, daughter of former Thai prime minister Thaksin Shinawatra, was sworn in as Thailand’s youngest-ever prime minister, marking the Shinawatra family’s return to power. This comes as Thailand’s military and royalists supported her rise to counter a youth-led progressive movement that threatened their influence

• Brazil

  • Tens of thousands of supporters of Jair Bolsonaro protested in São Paulo against Brazil’s Supreme Court ban on Elon Musk’s X platform, accusing the court of censorship ahead of upcoming municipal elections

• Tibet

  • The Dalai Lama announced that he would discuss how to choose his successor, amid worsening health and a recent surgery in the U.S. Beijing asserts that they will intercede and have final say over the succession issue

• North Korea

  • For the first time, North Korea published photos of an uranium-enrichment facility. The move comes after an agreement between North Korea and Russia to defend each other if attacked

• Netherlands

  • The Netherlands expanded export control rules requiring ASML to seek licenses for shipping certain chip-making equipment outside the EU, citing increased security risks linked to technological advancements and geopolitical concerns, especially regarding China. ASML doesn’t expect the new requirements to affect its financial targets

Commodities

• Oil Prices

  • WTI: $71.92 per barrel
    • 4.76% WoW; 0.38% YTD; (19.76%) YoY
  • Brent: $74.49 per barrel
    • 4.02% WoW; (3.31%) YTD; (20.16%) YoY

• US Production

  • U.S. oil production amounted to 13.2 million bpd for the week ended September 13, down 0.1 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 588, down 2 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 417.1 million barrels, down (0.2%) YoY
    • Refiners operated at a capacity utilization rate of 92.1% for the week, down from 92.8% in the prior week
    • U.S. crude oil imports now amount to 6.867 million barrels per day, down (3.0%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.21 per gallon in the week of September 20,
      down (16.7%) YoY
      • Gasoline prices on the East Coast amounted to $3.20, down (14.9%) YoY
      • Gasoline prices in the Midwest amounted to $3.09, down (18.5%) YoY
      • Gasoline prices on the Gulf Coast amounted to $2.83, down (19.6%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.52, down (15.9%) YoY
      • Gasoline prices on the West Coast amounted to $4.27, down (19.2%) YoY
    • Motor gasoline inventories were up by 0.1 million barrels from the prior week
    • Motor gasoline inventories amounted to 221.6 million barrels, up 1.0% YoY
    • Production of motor gasoline averaged 9.66 million bpd, down (0.5%) YoY
    • Demand for motor gasoline amounted to 8.776 million bpd, up 4.4% YoY

  • Distillates

    • Distillate inventories decreased by 0.1 million in the week of September 20
    • Total distillate inventories amounted to 125.1 million barrels, up 4.6% YoY
    • Distillate production averaged 5.056 million bpd, up 5.7% YoY
    • Demand for distillates averaged 3.798 million bpd in the week, down (8.8%) YoY

  • Natural Gas

    • Natural gas inventories increased by 58 billion cubic feet last week
    • Total natural gas inventories now amount to 3,445 billion cubic feet, up 5.4% YoY

    

Credit News

High yield bond yields decreased 26bps to 6.89% and spreads decreased 27bps to 336bps. Leveraged loan yields decreased 2bps to 8.18% and spreads decreased 2bps to 495bps. WTD Leveraged loan returns were positive 20bps. WTD high yield bond returns were positive 97bps. 10yr treasury yields increased 6bps to 3.75%. High yield bonds rallied by the most since May as the Fed delivered a good 50bp cut with 3Q growth tracking above consensus amid a resilient consumer.

High-yield:

Week ended 09/20/2024

• 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 09/20/2024

• 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: Digital Media Solutions ($208mn, 9/12/24), SunPower ($143mn, 8/5/2024), 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 09/20/2024

• 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