U.S. News

U.S. Economic Indicators

• The leading indicators dropped 0.5% in September, worse than the forecasted 0.3% decline
• Experts said that the magnitude of the change is not significant enough to suggest any sign of major trouble in the economy
• The decrease was mainly due to weakness in a few key industries, such as housing and manufacturing

Consumer Sentiment

• Consumer sentiment rose to 70.5 in the first of two readings in October, up from 70.1 in September
• The increase in consumer sentiment is caused by Republicans’ growing confidence that Donald Trump will win the presidency, coupled with lower interest rates
• Despite the increase, consumer sentiment is still at depressed levels, well below a post-pandemic high of 88.3 in 2021

Existing Home Sales

• U.S. home sales fell 1% to an annual rate of 3.84 million in September, the lowest level in 14 years. Compared to September 2023, home sales are down 3.5%
• The total number of homes listed on the market in September rose 23% from last year, to 1.39 million units. There is a 4.3-month supply of unsold inventory, which is considered a balanced market
• The median price for an existing home in September rose 3% to $404,500, which is about 50% higher than the same period five years ago

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 227,000 in the week ended October 18, down 15,000 from the prior week
• The four-week moving average was 238,500, up 2000 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 28,000 to 1.897 million in the week ended October 11. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $7.029 trillion in the week ended October 25, down $9.9 billion from the prior week
• Treasury holdings totaled $4.358 trillion, down $4.9 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.28 trillion in the week, down $1.5 billion from the prior week



Total Public Debt

• Total public debt outstanding was $35.78 trillion as of October 25, an increase of 6.2% from the previous year
• Debt held by the public was $26.56 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 $3,094.82 per 40ft container
• Drewry’s composite World Container Index has increased by 130.7% 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 0.2% 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

  • Israel launched a retaliatory strike against Iran early Saturday, responding to the 180-missile attack from Iran that occurred this month. The attacks took place over several waves during multiple hours, hitting missile manufacturing facilities and air-defense sites. Iran stated that four soldiers died. The attack seemed to be calibrated to avoid provoking heavy retaliation, as Israel avoided Iran’s nuclear and oil infrastructure
  • Israel’s top cease-fire negotiator offered Hamas safe passage out of Gaza in exchange for the hostages. The offer was swiftly rejected by Hamas, demonstrating their ongoing commitment to defending their territory. Negotiators are still skeptical that a breakthrough will take place in the near future
  • Several people were killed in a suspected terrorist attack at a major defense facility near Istanbul. Four people were killed and at least 14 were injured. No group has yet taken responsibility for the attack

• Russia

  • North Korea has sent at least 3,000 troops to Russia for training, potentially to be used to help Russia fend off the Ukrainian counter offensive. The U.S. and its allies signaled that the use of North Korean soldiers would constitute a major escalation in the war
  • Elon Musk has reportedly been in regular contact with Russian President Vladimir Putin since late 2022, discussing personal topics, business, and geopolitical tensions. According to the Wall Street Journal, Putin asked Musk to avoid activating his Starlink satellite internet service over Taiwan as a favor to Chinese leader Xi Jinping. Officials say that Musk’s strong business ties with U.S. military and intelligence agencies make these communications a potential national security threat
  • The increasingly authoritarian ruling party in Georgia, the Georgian Dream party, declared victory in a parliamentary election on Sunday. The Georgian Dream party casted the election as a choice between war and peace, vowing to stay out of the conflict in Ukraine. Once considered the most pro-Western former Soviet satellite, the Georgian Dream party has aligned the country more with Russian politics and has grown increasingly antagonistic toward the EU and the U.S. The opposition claims that the election results were falsified

• China

  • China’s youth jobless rate dropped in September to 17.6%, down from 18.8% in August. The news comes after China reported a 4.6% year-over-year expansion in Q3, marking the slowest pace in six quarters
  • The Standing Committee of China’s National People’s Congress said it will meet from November 4 to November 8 to review a basket of bills and government reports. Investors anticipate the legislative body will approve a multi-billion-dollar fiscal stimulus plan by year-end, though state media did not mention stimulus when announcing the meeting dates
  • Chinese hackers targeted the phones of Donald Trump, JD Vance, and people affiliated with Kamala Harris’s campaign. It is not yet clear what the hackers were able to obtain from their efforts. The cyberattack was made possible by the hackers’ access to compromised U.S. telecommunications infrastructure, which was discovered last month. The Biden administration is still grappling with the extent of the intrusions, with some viewing them as potentially catastrophic to national security and election integrity

• Peru

  • Former Peruvian President Alejandro Toledo was sentenced to more than 20 years in prison for taking a $20 million dollar bribe from Brazilian construction company Odebrecht in exchange for a highway contract

• Cuba

  • Cuba’s government has struggled to return power to millions of Cubans after a blackout impacted everything from running water to the operation of banks and ATMs

• Japan

  • Japan’s inflation rate slowed to 2.5% in September, down from 3.0% in August, largely due to government energy subsidies. This gives the Bank of Japan more time to decide on future rate hikes, but concerns remain over whether inflation is sustained by wage growth, as service inflation remains weak

• UK

  • U.K. retail sales volumes rose 0.3% in September, driven by strong spending on technology products. The boost in consumer spending is raising hopes for a soft economic landing, with inflation nearing the Bank of England’s 2% target, potentially paving the way for interest rate cuts

• Cuba

  • Cuba experienced a nationwide blackout on Friday, following government orders to shut down nonessential businesses to conserve energy amid severe fuel shortages, deteriorating infrastructure, and a worsening economic crisis

• Africa

  • A new deal gives Ethiopia naval access to Somaliland in exchange for recognizing Somaliland’s independence, escalating tensions with Somalia, which strongly opposes the move. The conflict risks undermining anti-al-Shabaab efforts, involving Egypt, and destabilizing the Horn of Africa further, raising international concerns

• Canada

  • Canadian Prime Minister Justin Trudeau called India’s alleged interference in Canada “a horrific mistake,” following the expulsion of six Indian diplomats over their alleged involvement in the killing of a Sikh separatist leader. India denied the allegations and expelled Canadian diplomats in retaliation, blaming Trudeau for damaging relation

• India

  • A former employee of India’s intelligence service has been charged by U.S. prosecutors for allegedly directing a plot to kill Sikh activist Gurpatwant Singh Pannun in New York, escalating tensions between India and Western countries regarding the targeting of Sikh separatists

• Australia

  • King Charles and Queen Camilla have begun their tour of Australia, starting with a church service in Sydney. This is the King’s first visit since becoming Australia’s head of state in 2022 and since starting cancer treatment earlier this year. The six-day visit includes meeting leaders, celebrating Australian culture, and supporting environmental initiatives, with a trip to Samoa to follow

Commodities

• Oil Prices

  • WTI: $71.66 per barrel
    • 3.52% WoW; 0.01% YTD; (13.88%) YoY
  • Brent: $75.94 per barrel
    • 3.94% WoW; (1.43%) YTD; (13.64%) YoY

• US Production

  • U.S. oil production amounted to 13.5 million bpd for the week ended October 18, down 0.1 million bpd
    from the prior week

• Rig Count

  • The total number of oil rigs amounted to 585, down 0 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 420.0 million barrels, up 1.2% YoY
    • Refiners operated at a capacity utilization rate of 89.5% for the week, up from 87.7% in the prior week
    • U.S. crude oil imports now amount to 5.529 million barrels per day, down 7.0% YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.14 per gallon in the week of October 25,
      down (10.6%) YoY
      • Gasoline prices on the East Coast amounted to $3.17, down (8.4%) YoY
      • Gasoline prices in the Midwest amounted to $3.09, down (8.9%) YoY
      • Gasoline prices on the Gulf Coast amounted to $2.82, down (10.0%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.35, down (12.1%) YoY
      • Gasoline prices on the West Coast amounted to $4.17, down (16.3%) YoY
    • Motor gasoline inventories were up by 0.9 million barrels from the prior week
    • Motor gasoline inventories amounted to 213.6 million barrels, down (4.4%) YoY
    • Production of motor gasoline averaged 9.95 million bpd, up 1.3% YoY
    • Demand for motor gasoline amounted to 8.838 million bpd, down (0.3%) YoY

  • Distillates

    • Distillate inventories decreased by -1.1 million in the week of October 25
    • Total distillate inventories amounted to 113.8 million barrels, up 1.6% YoY
    • Distillate production averaged 5.011 million bpd, up 5.9% YoY
    • Demand for distillates averaged 4.131 million bpd in the week, up 1.5% YoY

  • Natural Gas

    • Natural gas inventories increased by 80 billion cubic feet last week
    • Total natural gas inventories now amount to 3,785 billion cubic feet, up 2.3% YoY

    

Credit News

High yield bond yields increased 14bps to 7.25% and spreads increased 3bps to 322bps. Leveraged loan yields increased 7bps to 8.47% and spreads decreased 1bps to 475bps. WTD Leveraged loan returns were positive 12bps. WTD high yield bond returns were negative 36bps. 10yr treasury yields increased 11bps to 4.20%. Yields rose over the past week as investors absorbed an in-line start to earnings season, strong economic data, and a further rise in Treasury yields amid speculation the Fed will assume a more measured approach on rate cuts.

High-yield:

Week ended 10/25/2024

• 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 10/25/2024

• 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 10/25/2024

• 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