U.S. News

• Consumer Price Index

• • • Consumer prices overall were flat in October and rose 3.2% from a year earlier, a slower pace than in September as prices for gasoline fell
    • Core prices, which exclude food and energy items, rose 0.2% in October from the prior month and increased 4% from a year earlier, the smallest annual change since September 2021
    • The slowdown reflected lower prices for cars and airfares and milder growth in housing costs

• Purchasing Managers Index

• • • The Purchasing Managers Index, which tracks prevailing economic trends in the manufacturing and service sectors, slipped to 46.7 in October
    • The index was 2.3 percentage points lower than the 49 percent recorded in September
    • The data underscores that companies are managing outputs appropriately as order softness continues

• Retail Sales

• • • Sales at retailers nationwide fell 0.1% in October and dropped for the first time in seven months
    • Auto dealers posted a 1% decline in sales to weigh down headline retail numbers
    • However, sales at internet retailers, bars and restaurants both rose slightly in October, indicating that consumers still have discretionary income to spend on wants instead of needs

• Jobless Claim

• • • Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 231,000 in
      the week ended November 10, up 13,000 from the prior week
    • The four-week moving average was 220,250, up 7750 from the prior week
    • Continuing claims – those filed by workers unemployed for longer than a week – increased by 32,000 to 1.865
      million in the week ended November 3. This figure is reported with a one-week lag

• Fed’s Balance Sheet

• • • The Federal Reserve’s assets totaled $7.815 trillion in the week ended November 17, down $45.7 billion from
      the prior week
    • Treasury holdings totaled $4.869 trillion, down $4.1 billion from the prior week
    • Holdings of mortgage-backed securities (MBS) were $2.46 trillion in the week, up $0.0 billion from the
      prior week

• Total Public Debt

• • • Total public debt outstanding was $33.74 trillion as of November 17, an increase of 7.8% from the previous
      year
    • Debt held by the public was $26.58 trillion, and intragovernmental holdings were $7.12 trillion

• Inflation Factors

• CPI:

• • • • The consumer-price index rose 3.2% in October year over year
      • On a monthly basis, the CPI increased 0.0% in October on a seasonally adjusted basis, after increasing
        0.4% in September
      • The index for all items less food and energy (core CPI) rose 0.2% in October, after rising 0.3% in
        August
      • Core CPI increased 4.0% for the 12 months ending October

• Food and Beverages:

• • • • The food at home index increased 2.1% in October from the same month a year earlier, and increased
        0.3% in October month over month
      • The food away from home index increased 5.4% in October from the same month a year earlier, and
        increased 0.4% in October month over month

• Commodities:

• • • • The energy commodities index decreased (4.9%) in October after increasing 2.3%
      • The energy commodities index fell (6.2%) over the last 12 months
      • The energy services index (1.0%) in October after increasing 0.1% in September
      • The energy services index fell (2.3%) over the last 12 months
      • The gasoline index fell (5.3%) over the last 12 months
      • The fuel oil index fell (21.4%) over the last 12 months
      • The index for electricity rose 2.4% over the last 12 months
      • The index for natural gas fell (15.8%) over the last 12 months

• Supply Chain:

• • • • Drewry’s composite World Container Index decreased to $1,469.00 per 40ft
      • Drewry’s composite World Container Index has decreased by (43.3%) over the last 12 months

• Housing Market:

• • • • The shelter index increased 0.3% in October after increasing 0.6% in September
      • The rent index increased 0.3% in September after increasing 0.6% in September
      • The index for lodging away from home decreased (6.1%) in October after increasing 0.7% in September

• Fed Funds Rate

• • • The effective Federal Funds Rate is at 5.33%, remaining flat since August and up 1% since the start of 2023

World News

• Israel/Middle East

  • Israeli forces have taken control of much of northern Gaza – at least the parts that are above ground. However, the war is entering a new phase as the Israeli military takes its fight underground and into Gaza’s subterranean tunnel network
  • In an effort to prevail, the Israeli military is rolling out revamped tools, such as camera-carrying robots to map the tunnels and container trucks filled with explosive liquids that are pumped into them through hoses
  • Israel is gathering new intelligence on the network every day, finding new tunnels and interrogating militants as it puts together pieces that give its military a better picture of the underground city. Israel said that its forces had already discovered at least 500 shafts

• Ukraine

  • Fierce fighting has erupted between Russian forces and Ukrainian units that crossed over the Dnipro River to the Russian-occupied eastern bank of the river in the southern Kherson region
  • Battles are concentrated around a number of villages on the east or left bank of the river where Ukraine has managed to establish several footholds
  • Meanwhile, Ukraine’s air force said Friday that it shot down nine out of ten Russian drones over the Mykolayiv and Odesa regions in the southern Ukraine, the central Zhytomyr region and the Khmelnytskyi region in the west

• Russia

  • Russia is not exporting its Lancet drones due to high domestic demand, as the weapon emerges as one of the biggest dangers Ukrainian forces face
  • The suicide drones are cheap to make and have been shown capable of destroying Ukraine’s valuable Western-donated military equipment, adding difficulties to Kyiv’s slow and gruelling counteroffensive

• China

  • Chinese president Xi Jinping made his first trip to the U.S. in six years, attending a dinner with U.S. corporate executives and other guests
  • Xi sought to enlist American corporations’ help in easing bilateral tensions, emphasizing the room for both nations to work together
  • Throughout his speech, Xi described himself as a leader of the people and stressed the importance of building bilateral ties
  • In attendance were chief executives including Apple’s Tim Cook and BlackRock’s Larry Fink, along with leaders and senior executives from Qualcomm, Boeing, Blackstone, KKR, Pfizer, FedEx and other large U.S. companies, which all invest in China and collectively have trillions of dollars in market value

• Spain

  • Spain’s parliament re-elected Pedro Sánchez as prime minister, following months of political uncertainty and widespread protests after the center-left politician promised an amnesty for Catalan separatists in return for their support

• United Kingdom

  • The U.K. government has sanctioned 29 entities and individuals operating in and supporting Russia’s gold and oil sectors, in an effort to cut off revenue streams funding its war in Ukraine

• Germany

  • Germany is working on a plan to send some asylum seekers to Africa while their cases are decided, marking a U-turn for a country that has long been open to migrants but is straining under a surge in arrivals

• Pakistan

  • Pakistan has started rounding up tens of thousands of undocumented Afghans for deportation back to the country they fled, prompting fears that some awaiting resettlement to the U.S. could be swept up

• India

  • Apple notified a number of Indian opposition lawmakers this week that their phones were likely targets of state-sponsored attackers, prompting several of the individuals to express concern about the possible use of surveillance by the government of Prime Minister Narendra Modi

• Italy

  • In recent months, more than a thousand minor earthquakes have rattled the area around the Campi Flegrei volcano in southern Italy, stoking fears that it may soon erupt again after nearly five centuries

• Finland

  • Finland said that a Chinese ship’s anchor likely caused a mysterious rupture of an undersea gas pipeline in the Baltic Sea last month. The finding has raised concerns about the vulnerability of European infrastructure to sabotage amid mounting tensions between Russia and the West

Commodities

• Oil Prices

  • WTI: $75.89 per barrel
    • (1.66%) WoW; (4.61%) YTD; (7.04%)YoY
  • Brent: $80.62 per barrel
    • (0.99%) WoW; (3.93%) YTD; (10.20%)YoY

• US Production

  • U.S. oil production amounted to 13.2 million bpd for the week ended November 10, down 0.0 million bpd from the prior week

• Rig Count

  • The total number of oil rigs amounted to 618, up 2 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 439.4 million barrels, up 0.9% YoY
    • Refiners operated at a capacity utilization rate of 86.1% for the week, up from 85.2% in the prior week
    • U.S. crude oil imports now amount to 6.394 million barrels per day, down (14.6%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.33 per gallon in the week of November 17, down (10.1%) YoY
      • Gasoline prices on the East Coast amounted to $3.32,down (10.5%) YoY
      • Gasoline prices in the Midwest amounted to $3.26, down (13.1%) YoY
      • Gasoline prices on the Gulf Coast amounted to $2.90, down (10.0%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.45, down (9.7%) YoY
      • Gasoline prices on the West Coast amounted to $4.65, down (7.8%) YoY
    • Motor gasoline inventories were down by 1.5 million barrels from the prior
    • Motor gasoline inventories amounted to 215.7 million barrels, up 3.7%
    • Production of motor gasoline averaged 9.42 million bpd, down (3.8%) YoY
    • Demand for motor gasoline amounted to 8.949 million bpd, up 2.4% YoY

  • Distillates

    • Distillate inventories decreased by -1.4 million in the week of November 17
    • Total distillate inventories amounted to 106.6 million barrels, down (0.7%)
    • Distillate production averaged 4.753 million bpd, down (6.7%) YoY
    • Demand for distillates averaged 4.109 million bpd in the week, up 6.4% YoY

  • Natural Gas

    • • Natural gas inventories increased by 60 billion cubic feet last week
      • Total natural gas inventories now amount to 3,833 billion cubic feet, up 5.2% YoY

    

Credit News

High yield bond yields decreased 15bps to 8.72% and spreads widened 5bps to 415bps (a low of 403 was hit midweek). Leveraged loan yields decreased 18bps to 9.93% and spreads tightened 5bps to 558bps. WTD Leveraged loan returns were positive 29bps. WTD high yield bond returns were positive 73bps. Credit markets continued a multi-week rally with ongoing significant inflows. The two-week inflow into high yield has now reached ~$10bn, the largest recorded since 2020. The two-week period ending 6/4/20 saw a ~$12bn inflow.

High-yield:

Week ended 11/17/2023

• 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 11/17/2023

• 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: Air Methods ($1.7bn, 10/24/23), WeWork ($1.6bn, 10/15/23), Rite Aid ($3.0bn 10/16/23), Mallinckrodt ($2.8bn 8/28/23), Yellow Corp ($485mm 8/8/23), Anchor Glass ($675mm 7/11/23), Instant Brands ($391mm 6/12/23), Cyxtera Technologies ($768mm 6/4/23), Diebold ($2.0bn 6/1/23), Envision Health ($7.7bn 5/14/23), Venator Materials ($1.1bn 5/12/23), Bed Bath & Beyond ($5.2bn 4/22/23), David’s Bridal ($254mn 4/17/23), Monitronics International ($794mm 4/15/23), Catalina ($222mn 3/29/23), Diamond Sports ($8.6bn, 2/15/23), Avaya ($2.9bn, 2/14/23), Heritage Power ($485mn, 1/24/23), Serta Simmons Bedding($1.9bn, 1/23/23), Party City Holdings ($1.0bn, 01/17/23), Exela Intermediate ($1.4bn, 1/15/23)

CLOs:

Week ended 11/17/2023

• 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: Dry Powder for All Private Equity Buyouts

Diagram R: Structured Credit Spreads

Diagram S: Structured Credit Yield

Diagram T: CAT Bonds – Cumulative Returns

Freight Rates

Drewry World Container Index

China-Global & Shanghai Export Container Freight Index

Real Estate

US Rental Housing Price Trends Outlook

• • Shelter costs are calculated using owner’s equivalent rent and include all rents paid, whether that is a new lease signed or an ongoing lease with a rate determined last year. Whereas Zillow’s rent index only accounts for recently signed leases
  • Zillow peaked 13 months before the Labor Department’s peak this past March

• WSJ adjusted Zillow to average rent over the last 18 months, and the trend mirrored the Labor Department’s data
• The Zillow rent index can help provide a rough earlier approximation of inflation trends
• As for a forecast, the Labor Department’s measure of rent inflation, and by extension shelter inflation, has nowhere to go but down