U.S. News

Consumer Confidence

• The consumer confidence index dropped 8.1 points in December, down to a three-month low of 104.7 and below the forecasted increase to 113
• The survey was completed before the FOMC December meeting, when the committee stated it plans on cutting interest rates less in 2025 than previously thought
• Nearly 50% of consumers thought that new tariffs proposed by the upcoming Trump administration would increase their cost-of-living next year. Consumers also expected inflation to rise at the slowest pace since 2020

New Home Sales

• New home sales rose nearly 6% in November, though demand was still lower than usual due to high mortgage rates, high home prices, and a lack of housing supply
• Sales increased to an annual rate of 664,000 in November, up from 627,000 in October
• According to economists surveyed by the Wall Street Journal, home sales are unlikely to rise much more until builders construct more homes and mortgage rates decrease

U.S. Trade Deficit

• The trade deficit in goods rose nearly 5% in November, reaching near all-time highs
• Goods imports increased by $12 billion in November to $279.2 billion, while goods exports rose $7.4 billion to $176.4 billion, which is close to record highs
• Many businesses are ordering more foreign-made goods than usual, ahead of tariffs proposed by President-Elect Donald Trump

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 December 20, down 1,000 from the prior week.
• The four-week moving average was 226,500, up 1,000 from the prior week.
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 46,000 to 1.910 million in the week ended December 13. This figure is reported with a one-week lag.



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $6.886 trillion in the week ended December 27, down $3.4 billion from the prior week.
• Treasury holdings totaled $4.309 trillion, down $3.9 billion from the prior week.
• Holdings of mortgage-backed securities (MBS) were $2.25 trillion in the week, down $3.0 billion from the prior week.



Total Public Debt

• Total public debt outstanding was $36.11 trillion as of December 27, an increase of 6.5% from the previous year.
• Debt held by the public was $28.80 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

• Israel increased the pressure against the Houthis in Yemen on Thursday, launching its first attacks against the capital, the San’a airport, two power stations, and other infrastructure that Israel claims the Houthis use to import Iranian weapons. The escalation came in response to ballistic missile attacks into Tel Aviv
• Fourteen members of the Hayat Tahrir al-Sham (HTS) security force were killed on Wednesday in an ambush orchestrated by Assad loyalists
• Also on Wednesday, protests ignited after video surfaced of HTS troops standing by as a famed Alawite shrine was destroyed. The transitional government claimed that the video is old and that HTS is working to protect religious sites
• Protests have also broken out in some southern Syrian villages against the Israeli military presence. Some villages are refusing to surrender their arms to Israeli forces, saying they would only hand over weapons to the Syrian government. So far, one young man was shot and wounded in Maariyah, and several people were wounded in Sweisa
• Residents of some southern villages claim that the Israeli military is disrupting their mobility and access to essentials, such as food, water, and electricity

Europe

• A Dutch court sentenced five men in connection to the clash with Israeli soccer fans. Authorities claimed that the attacks were organized and targeted, as several of those convicted had posted on online forums advocating for violence ahead of the event. Sentences ranged from community service to six months in prison
• Finland detained a Russian oil tanker over suspicion that it had severed undersea power and data cables. The tanker traversed and slowed down over the cables connecting Finland and Estonia around the time they were severed. Finnish Special Forces met no resistance from the crew when they took control of the ship
• Iran detained Cecilia Sala, a prominent Italian journalist, without specifying any charges against her. Authorities are concerned that Iran will hold her as leverage in their dealings with the West, which has become an increasingly common tactic by authoritarian regimes
• Azerbaijan Airlines said that “physical and technical external interference” caused a plane crash that killed 38 people flying to southern Russia. This is the closest that officials have come to confirming that Russia downed the plane with an air-defense system. Putin called Azerbaijan’s president to apologize but stopped short of taking responsibility

China

• Chinese authorities are advising Chinese students in the U.S. to be back on campus before President-Elect Donald Trump’s inauguration on January 20. During his last administration, Donald Trump targeted Chinese student visas, leaving some concerned about being stranded abroad with no way to return to campus
• Fan Weiqiu, who killed 35 people by driving a car into a crowd of people, was sentenced to death on Friday. The verdict concluded an unusually fast judicial proceeding, as the incident occurred the evening of November 11. In the wake of similar attacks across China, Xi Jinping urged officials to maintain social stability and carry out a severe punishment against perpetrators
• Daniel Duggan, a former U.S. marine, will be extradited to the United States from Australia. Duggan was accused by U.S. authorities of training Chinese pilots how to land on aircraft carriers, a skill that China aims to develop among its pilots as it expands its carrier fleet and modernizes its navy

South Korea

• South Korea’s legislature voted to impeach acting President Han Duck-soo, after he refused to make judicial appointments required to advance the impeachment of his predecessor. This comes just two weeks after the National Assembly impeached President Yoon Suk Yeol

Germany

• A Christmas market attack in Germany killed five and injured 200 people. The suspect, a 50-year-old Saudi national, was a prominent anti-Islam activist, an outspoken critic of Germany’s immigration policy, and a supporter of Germany’s nationalist AfD party

India

• Former Indian Prime Minister Manmohan Singh, an economist who enacted market reforms and helped open India’s economy, died at 92

Sudan

• According to the Famine Review Committee, 638,000 people across five localities in Sudan’s Darfur and Kordofan regions are now suffering from famine. 17 additional localities are at risk of famine as military conflict escalates and humanitarian access is limited

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

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

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

• The 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

Commodities

Oil Prices

• WTI: $70.60 per barrel
• 1.64% WoW; (1.47%) YTD; (4.47%) YoY
• Brent: $74.09 per barrel
• 1.58% WoW; (3.83%) YTD; (6.98%) YoY

US Production

• U.S. oil production amounted to 13.6 million bpd for the week ended December 20, down 0.0 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 416.8 million barrels, down (4.5%) YoY.
• Refiners operated at a capacity utilization rate of 91.8% for the week, down from 92.5% for the week, up from 91.8% in the prior week.
• U.S. crude oil imports now amount to 6.649 million barrels per day, down 3.1% YoY.

• Gasoline

• Retail average regular gasoline prices amounted to $3.03 per gallon in the week of December 27, down (2.8%) YoY.
• Gasoline prices on the East Coast amounted to $3.06, down (5.3%) YoY.
• Gasoline prices in the Midwest amounted to $3.02, up 2.8% YoY.
• Gasoline prices on the Gulf Coast amounted to $2.75, down (1.1%) YoY.
• Gasoline prices in the Rocky Mountain region amounted to $3.01, up 1.3% YoY.
• Gasoline prices on the West Coast amounted to $3.91, down (6.5%) YoY.
• Motor gasoline inventories were up by 1.6 million barrels from the prior week.
• Motor gasoline inventories amounted to 223.7 million barrels, down (1.1%) YoY.
• Production of motor gasoline averaged 9.92 million bpd, down (1.1%) YoY.
• Demand for motor gasoline amounted to 9.008 million bpd, down (1.7%) YoY.

• Distillates

• Distillate inventories decreased by -1.7 million in the week of December 27.
• Total distillate inventories amounted to 116.5 million barrels, up 0.6% YoY.
• Distillate production averaged 5.272 million bpd, up 3.0% YoY.
• Demand for distillates averaged 4.253 million bpd in the week, up 6.9% YoY.

Natural Gas

• Natural gas inventories decreased by 93 billion cubic feet last week.
• Total natural gas inventories now amount to 3,529 billion cubic feet, up 1.1% YoY.

Credit News

High yield bond yields decreased 7bps to 7.41% and spreads decreased 8bps to 302bps. Leveraged loan yields increased 3bps to 8.86% and spreads increased 1bps to 475bps. WTD Leveraged loan returns were positive 15bps. WTD high yield bond returns were positive 31bps. 10yr treasury yields increased 4bps to 4.63%.

High-yield:

Week ended 12/27/2024

• 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 12/27/2024

• 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 12/27/2024

• 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

Real Estate

Getting used to 6% to 7% mortgage rates

The real estate industry has now given up on trying to outwait those mortgage rates and is exhorting sellers and buyers to get used to “a new normal of mortgage rates between 6% and 7%,” as the NAR put it today

These 6% to 7% mortgage rates are of course the old normal mortgage rates that prevailed in the decades before the money-printing era of 2008 through 2021, and they’re unlikely to go back to the pandemic range

Fannie Mae, the largest Government Sponsored Enterprise that buys and guarantees mortgages, came out earlier this month, encouraging mortgage investors, the real estate industry, home sellers, and home buyers to get used to these 6% to 7% mortgage rates:

“It is unlikely we will again see the low mortgage rates we had during the COVID-19 pandemic,” Fannie Mae wrote in a blog post, adding that “current mortgage rates and Fannie Mae’s forecast for 2025 rates are well in line with rates over the past several decades. Since 1990, the 30-year fixed-rate mortgage has averaged 6%.”

The average 30-year fixed mortgage rate rose to 7.14% today, according to the daily measure by Mortgage News Daily

Freddie Mac’s weekly measure of the average 30-year fixed mortgage rate rose to 6.72% today

Mortgage rates track the 10-year but at a higher level, with a spread between them that varies. And the 10-year yield has jumped by nearly 20 basis points to 4.58% since the Fed’s rate cut yesterday

Mortgage rates have been above 6% since mid-2022. The market might as well get used to this mortgage rates and deal with them – and lower prices, after the ridiculous spike, will bring up the volume

Before the 2008-2021 money printing era, 5% mortgages had been essentially unheard of: