U.S. News

U.S. Retail Sales

• Retail sales rose 0.7% in November, higher than the forecasted 0.5% and above the 0.5% recorded in October
• Sales of new cars rose 2.6% last month, as dealerships increased incentives to move stockpiling inventory. Internet retailer sales increased 1.8%, while restaurant sales fell 0.4%
• Overall, retail sales have increased by 3.8% in the past year, similar to the annual increases in the decade pre-pandemic

FOMC Interest-Rate Decision

• The Federal Reserve announced a quarter point cut in interest rates, lowering the target interest rate range to 4.25%-4.5%
• The FOMC suggested that interest rate cuts would come at a slower pace in 2025 than previously anticipated, due to inflation remaining above the benchmark 2%
• Markets fell nearly 3% on the news of the cut but began showing signs of recovery later in the week

PCE Index

• The PCE index increased 0.1% in November, less than the forecasted 0.2% and lower than the 0.2% recorded in October
• The core rate also increased 0.1% in November, coming in lower than forecasts
• Over the last twelve months, the PCE index rose to 2.4%, up slightly from 2.3%. The increase in the core rate in the last twelve months stayed unchanged at 2.8%

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 220,000 in the week ended December 13, down 22,000 from the prior week.
• The four-week moving average was 225,500, up 1,250 from the prior week.
• Continuing claims – those filed by workers unemployed for longer than a week – decreased by 5,000 to 1.874 million in the week ended December 6. This figure is reported with a one-week lag.



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $6.889 trillion in the week ended December 20, down $8.2 billion from the prior week.
• Treasury holdings totaled $4.313 trillion, down $2.9 billion from the prior week.
• Holdings of mortgage-backed securities (MBS) were $2.25 trillion in the week, down $0.1 billion from the prior week.



Total Public Debt

• Total public debt outstanding was $36.17 trillion as of December 20, an increase of 6.7% from the previous year.
• Debt held by the public was $28.87 trillion, and intragovernmental holdings were $7.30 trillion.



Inflation Factors

CPI:

• The consumer-price index rose 2.7% in November year over year.
• On a monthly basis, the CPI increased 0.3% in November on a seasonally adjusted basis, after increasing 0.2% in October.
• The index for all items less food and energy (core CPI) remained flat 0.3% in November, after rising 0.3% in October.
• Core CPI increased 3.3% for the 12 months ending November.

Food & Beverages:

• The food at home index increased 1.6% in November from the same month a year earlier, and increased 0.5% in November month over month.
• The food away from home index increased 3.6% in November from the same month a year earlier, and staying flat 0.3% in November month over month.

Commodities:

• The energy commodities index increased 0.5% in November after decreasing (1.0) in
• The energy commodities index fell (8.5%) over the last 12 months.
• The energy services index rose (0.5%) in November after decreasing (0.4%) in October.
• The energy services index rose 2.8% over the last 12 months.
• The gasoline index fell (8.1%) over the last 12 months.
• The fuel oil index fell (19.5%) over the last 12 months.
• The index for electricity rose 3.1% over the last 12 months.
• The index for natural gas rose (1.8%) over the last 12 months.

Supply Chain:

• Drewry’s composite World Container Index increased to $3,803.26 per 40ft container.
• Drewry’s composite World Container Index has increased by 129.0% over the last 12 months.

Housing Market:

• The shelter index increased 0.3% in November after increasing 0.4% in October.
• The rent index increased 0.3% in November after increasing 0.4% in October.
• The index for lodging away from home decreased (1.0%) in November after decreasing (3.4%) in October.

Federal Funds Rate

• The effective Federal Funds Rate is at 4.33%, down (1.00%) year to date.

World News

Middle East

• Israeli President Benjamin Netanyahu and Defense Minister Israel Katz said they would indefinitely hold the 155-square-mile Syrian territory seized by Israeli troops. The buffer zone, with the high peak of Mount Hermon, provides a commanding view of strategically sensitive territory deeper inside Syria
• The U.N., along with countries including France, Saudi Arabia, Kuwait, Egypt, and Jordan, condemned Israel’s move into the Syrian buffer zone, arguing the action violated the 1974 agreement between Syria and Israel. Israel argued that the agreement was void when Syrian soldiers abandoned the buffer zone as the Assad regime collapsed
• Israeli leadership stated their intention to keep longer-term security control over the Gaza Strip. Depending on the post-war political circumstances, control of the Gaza Strip may come with obligations to the two million civilian population, such as schooling, garbage collection, and other public services
• Senior US officials stated that Turkey and its militia allies are building up forces along the Syrian border, signaling that Turkey is preparing an invasion of American-backed Syrian Kurds. US-backed cease-fire talks between the two forces dissolved without an agreement

Europe

• German Chancellor Olaf Scholz lost a confidence vote, which will lead to early elections in 2025. Scholz called for the vote of confidence fully expecting to lose, after Scholz’s coalition government collapsed last month. The coalition government had included free-market liberals, social democrats, and Greens, but it was ultimately unable to agree on economic policy
• Ukraine claims to have killed Russian Lieutenant General Igor Kirillov by detonating a scooter in Moscow. Igor Kirillov was the head of the Russian Armed Forces’ Radiological, Chemical and Biological Defense Troops. Russia has condemned the attack as an act of terror
• A car drove through a crowded Christmas market in Germany, killing 5 and wounding more than 200 people. The suspect is a Saudi exile and anti-Islam activist. Authorities are still not fully sure of the motive but believe it may be tied to dissatisfaction with Germany’s treatment of Saudi refugees

China

• US authorities are investigating whether TP-Link, a Chinese home-internet router manufacturer, is tied to cyberattacks and thus poses a national security threat. TP-Link has the most popular router on Amazon and services internet communication for the Defense Department and other federal government agencies
• According to a new report released by the Pentagon, China’s crackdown on corruption within the People’s Liberation Army could delay its modernization efforts, ultimately diminishing its ability to respond to threats. Over the last year and a half, Chinese leader Xi Jinping has removed over a dozen PLA officials and defense-industry executives, slowing development and procurement of advanced weaponry
• Taiwan received its first shipment of US M1A2 Abraham tanks, the most advanced battle tanks in the US arsenal. Taiwan has a backlog of orders for US weapons caused by the pandemic, along with wars in Ukraine and the Middle East, that defense analysts say will likely clear up further during the Trump administration. Beijing has decried these weapons shipments as interference in sovereign affairs

Brazil

• The Brazilian real has slipped to its lowest level against the dollar since the currency’s introduction in 1994. As a result, the government is now considering significant cuts in deficit spending, particularly on the country’s pensions and social benefits

El Salvador

• El Salvador is set to scale back its plan to adopt bitcoin as a national currency in exchange for a $1.4 billion loan by the International Monetary Fund. The deal struck by the IMF demonstrates a friendlier stance on governments’ use of bitcoin

Africa

• The war in Sudan has escalated with foreign mercenaries, including Colombian fighters, being deployed by the UAE to support the rebel Rapid Support Forces against Sudan’s military. The involvement of foreign fighters and weapons has complicated the conflict, with the UAE and Egypt backing opposing sides for strategic control over Sudan’s resources

U.K.

• A Chinese businessman with ties to Prince Andrew has been banned from entering the U.K. after intelligence services alleged he attempted to influence the British royal on behalf of Beijing, posing a national security risk; the businessman, identified as H6, was found to have cultivated a close relationship with Andrew, including being invited to his 2020 birthday party and acting on his behalf for a financial initiative linked to China

South Korea

• In a chaotic six-hour period, South Korea’s President Yoon Suk Yeol declared martial law, citing threats to democracy, only to have it overturned by a National Assembly vote, which lawmakers fought to complete as soldiers attempted to storm the legislature

Romania

• Romania’s Constitutional Court annulled its presidential election following allegations that a Kremlin-backed influence campaign on TikTok elevated pro-Russian candidate Calin Georgescu to a lead position. Using a network of 25,000 TikTok accounts, the campaign amplified Georgescu’s anti-NATO, anti-EU messaging, disrupting the electoral process and leading to the cancellation of the second round of voting

Spain

• he U.S. Federal Maritime Commission is investigating Spain for blocking American-flagged ships, suspected of carrying military cargo to Israel. If confirmed, Spain could face penalties, including restrictions on its ships docking at U.S. ports

India

• Under Prime Minister Modi’s economic strategy, conglomerates like the Adani Group have flourished through close governmental ties, leading to concerns about market concentration and its impact on competition. However, the group’s recent scandal involving bribery and securities fraud has sparked global scrutiny

Commodities

Oil Prices

• WTI: $69.46 per barrel
• (2.57%) WoW; (3.06%) YTD; (6.41%) YoY
• Brent: $72.94 per barrel
• (2.08%) WoW; (5.32%) YTD; (8.48%) YoY

US Production

• U.S. oil production amounted to 13.6 million bpd for the week ended December 13, down 0.1 million bpd from the prior week.

Rig Count

• The total number of oil rigs amounted to 589, down 0 from last week.

Inventories

• Crude Oil

• Total U.S. crude oil inventories now amount to 421.0 million barrels, down (5.1%) YoY.
• Refiners operated at a capacity utilization rate of 91.8% for the week, down from 92.4% in the prior week.
• U.S. crude oil imports now amount to 5.984 million barrels per day, down (1.5%) YoY.

• Gasoline

• Retail average regular gasoline prices amounted to $3.05 per gallon in the week of December 20, down (2.7%) YoY.
• Gasoline prices on the East Coast amounted to $3.10, down (1.9%) YoY.
• Gasoline prices in the Midwest amounted to $2.97, up (3.2%) YoY.
• Gasoline prices on the Gulf Coast amounted to $2.66, up (0.9%) YoY.
• Gasoline prices in the Rocky Mountain region amounted to $2.96, up 1.4% YoY.
• Gasoline prices on the West Coast amounted to $3.92, down (6.3%) YoY.
• Motor gasoline inventories were up by 2.3 million barrels from the prior week.
• Motor gasoline inventories amounted to 222.0 million barrels, down (2.1%) YoY.
• Production of motor gasoline averaged 9.87 million bpd, down (1.7%) YoY.
• Demand for motor gasoline amounted to 8.927 million bpd, up 2.0% YoY.

• Distillates

• Distillate inventories decreased by -3.2 million in the week of December 20.
• Total distillate inventories amounted to 118.2 million barrels, up 2.7% YoY.
• Distillate production averaged 5.094 million bpd, up 4.5% YoY.
• Demand for distillates averaged 4.498 million bpd in the week, up 17.7% YoY.

Natural Gas

• Natural gas inventories decreased by 125 billion cubic feet last week.
• Total natural gas inventories now amount to 3,622 billion cubic feet, up 1.3% YoY.

Credit News

High yield bond yields increased 43bps to 7.48% and spreads increased 19bps to 310bps. Leveraged loan yields increased 27bps to 8.83% and spreads increased 7bps to 474bps. WTD Leveraged loan returns were negative 2bps. WTD high yield bond returns were negative 109bps. 10yr treasury yields increased 25bps to 4.57%. Yields and spreads increased after the Fed implemented a hawkish rate cut on Wednesday. Fed now anticipates only two rate cuts next year. Leveraged Loan experienced its first weekly loss in 20 weeks as outflows resurfaced, following the largest stretch of inflows since early 2022 and as a record month for capital markets tapered off into the holiday season.

High-yield:

Week ended 12/20/2024

• 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 12/20/2024

• 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: Hearthside Food Solutions ($2.6bn, 11/22/24), Spirit Airlines ($1.1bn, 11/18/24), Franchise Group Inc ($1.1bn, 11/3/24), Exactech ($254mn, 10/29/24), American Tire Distributors ($975mn, 10/23/24), Accuride ($291mn, 10/11/2024), Mavenir Systems ($712mn, 9/27/24), Digital Media Solutions ($208mn, 9/12/24), 2U ($374mn, 7/25/24), Rodan & Fields ($763mn, 7/11/24), and Wheel Pros ($2.8bn, 7/11/24).

CLOs:

Week ended 12/20/2024

• 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