U.S. News

Consumer Price Index

• The CPI rose 0.2% in September, higher than the forecasted 0.1%. The yearly inflation rate dropped from 2.5% to 2.4%, the lowest level since February 2021
• The core CPI rose 0.3% in September, exceeding the forecast of 0.2% and moving the annual rate up from 3.2% to 3.3%
• This marks the first increase in the annual rate in a year and a half, showing that inflation is sticky in major parts of the economy

Consumer Credit

• Consumer credit rose $8.9 billion in August, below the $13.2 billion forecasted by economists
• The August gain brings credit growth to a 2.1% annual rate, down from a 6.3% rise in the prior month
• Revolving credit fell at a 1.2% rate in August, while nonrevolving credit grew 3.3% in August

Wholesale Inventories

• August 2024 sales of merchant wholesalers, excluding manufacturer’s sales branches and offices, were $670.9 billion. Sales were down 0.1% from July but up 1.1% from August 2023
• At the end of August, total inventories of merchant wholesalers, excluding manufacturer’s sales branches and offices, were $904.8 billion. Total inventories were up 0.1% from July and up 0.6% from August 2023

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 258,000 in the week ended October 4, up 33,000 from the prior week
• The four-week moving average was 231,000, up 6750 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 42,000 to 1.861 million in the week ended September 27. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.047 trillion in the week ended October 11, down $0.1 billion from the prior week
• Treasury holdings totaled $4.364 trillion, down $11.3 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.28 trillion in the week, down $12.5 billion from the prior week



Total Public Debt

• Total public debt outstanding was $35.68 trillion as of October 11, an increase of 6.4% from the previous year
• Debt held by the public was $26.43 trillion, and intragovernmental holdings were $7.16 trillion



Inflation Factors

CPI:

• The consumer-price index rose 2.4% in September year over year
• On a monthly basis, the CPI increased 0.2% in September on a seasonally adjusted basis, after increasing 0.2% in August
• The index for all items less food and energy (core CPI) rose 0.3% in September, after rising 0.3% in August
• Core CPI increased 3.3% for the 12 months ending September

Food and Beverages:

• The food at home index increased 1.3% in September from the same month a year earlier, and increased 0.4% in September month over month
• The food away from home index increased 3.9% in September from the same month a year earlier, and increased 0.3% in September month over month

Commodities:

• The energy commodities index decreased (4.0%) in September after decreasing (0.6%)
• The energy commodities index fell (15.3%) over the last 12 months
• The energy services index (0.4%) in September after decreasing (0.8%) in June
• The energy services index rose 3.4% over the last 12 months
• The gasoline index rose (15.3%) over the last 12 months
• The fuel oil index fell (22.4%) over the last 12 months
• The index for electricity rose 3.7% over the last 12 months
• The index for natural gas fell 2.0% over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index decreased to $3,349.32 per 40ft container
• Drewry’s composite World Container Index has increased by 144.6% over the last 12 months

Housing Market:

• The shelter index increased 0.2% in September after increasing 0.5% in August
• The rent index increased 0.5% in September after increasing 0.5% in August
• The index for lodging away from home decreased (3.8%) in August after decreasing (0.7%) in June

Federal Funds Rate

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

World News

• Middle East

  • The Biden administration will tighten sanctions on Iran in response to Iran’s ballistic missile attack on Israel. The move is perceived as an effort to persuade Israel against attacking Iran’s nuclear sites and oil infrastructure. The United States is concerned that if Israel attacks Iran’s oil facilities, then Tehran would respond with attacks against Saudi Arabia, which could force the U.S. to become involved militarily.
  • Israel is escalating its air and ground offenses in Lebanon, including strikes in central Beirut. Israel sent evacuation orders to a quarter of Lebanon, including over 100 villages and urban neighborhoods across the country’s south. Since initiating the ground invasion, the Israeli military said it killed Arae bel Shoga, a key Hezbollah commander. The attacks have injured four peacekeepers
  • Israel struck a building in Damascus, targeting a Hezbollah weapons smuggler, as the Israeli military expands its campaign to disrupt supply lines. According to Syrian state media, seven Syrian citizens were killed in the strike
  • Hezbollah launched more than 100 rockets into northern Israel on Tuesday, hitting a suburb of Haifa. Hezbollah states that the attack was in response to Israel targeting civilians in the southern suburbs of Beirut

• Russia

  • Arms dealer Viktor Bout, also known as the “Merchant of Death”, is brokering a $10 million arms deal with Houthi militants. The deal would include small arms, such as automatic weapons, and would mark an escalation for Russia, which has so far generally refrained from offering material support to Tehran’s allies. Viktor Bout was in U.S. custody but was traded for basketball player Brittney Griner in 2022
  • Journalist Bob Woodward is set to release a book “War”, which reveals that, as Russia began struggling in the conflict against Ukraine, Putin considered the use of tactical nuclear weapons. An internal U.S. assessment found the chance of Russia using a nuclear weapon was as high as 50% at one point
  • The book also speculates that former President Donald Trump idolized Putin, opening the possibility of manipulation. As evidence, the book reveals that Trump secretly sent Putin COVID test machines for Putin’s personal use at the outset of the pandemic

• China

  • After a historical rally, China’s stock market tumbled on Wednesday, after a news conference on Tuesday disappointed many investors. During the news conference, the National Development and Reform Commission did not establish the concrete stimulus measures that investors hoped for
  • In response to a 7.1% drop in the CSI 300 index, Chinese authorities scheduled another conference on Saturday. During that meeting, authorities again did not produce specific measures to stimulate an ailing Chinese economy. Finance Minister Lan Fo’an stated that he would spend about $300 billion of funds that were earmarked for this year but haven’t yet been used. Experts now say that any specifics will likely be announced later this month
  • China will impose tariffs on brandy imports from the European Union, likely in response to the EU’s decision to impose duties on Chinese electric vehicles. The decision deepens the tensions between the two trading powers

• Mexico

  • Alejandro Arcos, the mayor of Chilpancingo, the capital of Guerrero, was assassinated on Sunday, likely the victim of violent gangs that control the city. He was the second Chilpancingo official to be killed in three days
  • Mexico’s new President Claudi Sheinbaum is committed to using her first 100 days to lower homicides and reduce the power of organized crime in the country

• India

  • India is set to hold elections in Kashmir, which will bring some self-rule back to the region after years of being administered directly by New Delhi

• UK

  • The UK has agreed to transfer the Chagos Islands to Mauritius after decades of legal disputes, but will retain the use of Diego Garcia, a key military base leased to the US, for 99 years, ensuring strategic presence in the Indo-Pacific

• Japan

  • Japan’s new Prime Minister, Shigeru Ishiba, vowed to end deflation and urged the Bank of Japan to maintain its easy monetary policy, while announcing a new economic package to help low-income households cope with rising prices
  • The Nobel Peace Prize goes to Japanese Nihon Hidankyo, a grassroots atomic-bomb survivors group committed to ending nuclear proliferation

• Canada

  • Grain terminal workers on Canada’s West Coast returned to work after a four day strike halted crop exports during the harvest season. The work stoppage was estimated to halt nearly 100,000 metric tons of grain each day, resulting in a daily loss of $26 million

• Germany

  • A suspected Chinese spy arrested in Germany was allegedly collecting information on U.S. arms shipments to Israel and Germany’s weapons industry, highlighting Beijing’s interest in Western military logistics in Europe

• Haiti

  • The Gran Grif gang killed at least 70 people, including women and infants, in a brutal attack on the rural Haitian town of Pont Sondé, burning homes and escalating gang violence beyond Port-au-Prince. The massacre highlights the growing influence of gangs now controlling nearly 85% of the capital, worsening Haiti’s security and humanitarian crisis

• Africa

  • Countries in southern Africa, such as Namibia and Zimbabwe, are culling elephants and other wild animals to alleviate food shortages caused by the worst drought in over a century, impacting around 68 million people in the region

Commodities

• Oil Prices

  • WTI: $75.56 per barrel
    • 1.59% WoW; 5.46% YTD; (8.87%) YoY
  • Brent: $79.04 per barrel
    • 1.27% WoW; 2.60% YTD; (8.09%) YoY

• US Production

  • U.S. oil production amounted to 13.4 million bpd for the week ended October 4, up 0.2 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 586, up 1 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 422.7 million barrels, down (0.4%) YoY
    • Refiners operated at a capacity utilization rate of 86.7% for the week, down from 87.6% in the prior week
    • U.S. crude oil imports now amount to 6.628 million barrels per day, down (1.4%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.21 per gallon in the week of October 11,
      down (11.5%) YoY
      • Gasoline prices on the East Coast amounted to $3.12, down (12.9%) YoY
      • Gasoline prices in the Midwest amounted to $3.12, down (10.8%) YoY
      • Gasoline prices on the Gulf Coast amounted to $2.82, down (13.7%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.39, down (14.0%) YoY
      • Gasoline prices on the West Coast amounted to $4.16, down (21.3%) YoY
    • Motor gasoline inventories were down by 6.3 million barrels from the prior week
    • Motor gasoline inventories amounted to 214.9 million barrels, down (4.8%) YoY
    • Production of motor gasoline averaged 10.23 million bpd, up 5.6% YoY
    • Demand for motor gasoline amounted to 9.654 million bpd, up 12.5% YoY

  • Distillates

    • Distillate inventories decreased by -3.1 million in the week of October 11
    • Total distillate inventories amounted to 118.5 million barrels, up 1.3% YoY
    • Distillate production averaged 4.988 million bpd, up 5.5% YoY
    • Demand for distillates averaged 4.031 million bpd in the week, up 9.8% YoY

  • Natural Gas

    • Natural gas inventories increased by 82 billion cubic feet last week
    • Total natural gas inventories now amount to 3,629 billion cubic feet, up 2.8% YoY

    

Credit News

High yield bond yields increased 18bps to 7.21% and spreads decreased 9bps to 328bps. Leveraged loan yields increased 27bps to 8.45% and spreads decreased 7bps to 479bps. WTD Leveraged loan returns were positive 35bps. WTD high yield bond returns were negative 38bps. 10yr treasury yields increased 24bps to 4.09%. Yields rose while spreads tightened over the past week as Treasury yields extended their climb in response to resilient economic data and a firm CPI print.

High-yield:

Week ended 10/11/2024

• 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 10/11/2024

• 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: Mavenir Systems ($712mn, 9/27/24), 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), and 99 Cents Only Stores ($350mn, 4/7/24).

CLOs:

Week ended 10/11/2024

• 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

ZCGC RE Research: Housing Market Update

Florida housing market buckles, listing prices dropped to 30-Month low but are still way too high, and supply increased 

• The median listing price in September dropped to $437,251, the lowest since February 2022
• Compared to the seasonal peak in June 2022, the median listing price is down by 11%
• Closed sales for single-family houses Florida have fallen for three months in a row as of August, reducing their year-over-year gain to 1.5%
• Condo prices have fallen for the eighth month in a row as of August and are down 2.5% year-over-year 

• In September, there were 52,554 listings with price reductions in Florida, the second highest for any September in the data going back to 2016, behind 2018. They have surged by 76% from September last year.
• Active listings (total inventory minus listings with a pending sale) surged 35% year-over-year in Florida, to 185,696 listings, the highest for any September in the data going back to 2016, as demand has wilted and as inventory gets stale because prices are way too high

The median number of days a property sat on the market for sale before it sold or before it was pulled off the market rose to 74 days in September, matching September 2019, and both are the highest since 2017.

This metric is a mix of:

• How aggressively sellers pulled listings off the market if they didn’t sell;
• And how fast properties sold that did sell.

When sellers get more desperate, they leave the property on the market, rather than pulling it off quickly, and they might try reducing the price until it sells. In that dynamic, the days on the market lengthens

Freight Rates

Drewry World Container Index

China-Global & Shanghai Export Container Freight Index