U.S. News

• Federal Funds Rate Target

• • • The Federal Reserve on Wednesday announced that rates would remain steady between 5.25% to 5.5%
    • Federal Reserve Chairman Jerome Powell said he expects the economy to soften in the months ahead, though the
      Fed is not forecasting a recession
    • He left the door slightly ajar for another hike down the road if inflation doesn’t continue to slow

• Consumer Confidence

• • • Consumer confidence fell to a five-month low of 102.6 in October, marking three consecutive months of
      decline
    • Assessments of the present situation were driven by worries about inflation, rising interest rates and the
      conflict in the Middle East
    • However, consumers’ rating of current job availability held steady

• Construction Spend

• • • Spending on construction projects rose 0.4% in September to nearly $2 trillion and is up 8.7% year over year
    • In terms of residential real-estate, private residential construction rose 0.6% in September from the month
      before and single-family construction rose 1.3% in September, while multifamily fell 0.1%
    • Spending on public residential construction fell by 3.2%

• Jobless Claim

• • • Initial jobless claims, a measure of how many workers were laid off across the U.S., increased to 217,000 in
      the week ended October 27, up 5,000 from the prior week
    • The four-week moving average was 210,000, up 2000 from the prior week
    • Continuing claims – those filed by workers unemployed for longer than a week – increased by 35,000 to 1.818
      million in the week ended October 20 . This figure is reported with a one-week lag

• Fed’s Balance Sheet

• • • The Federal Reserve’s assets totaled $7.867 trillion in the week ended November 3, down $41.2 billion from
      the prior week
    • Treasury holdings totaled $4.900 trillion, down $12.1 billion from the prior week
    • Holdings of mortgage-backed securities (MBS) were $2.46 trillion in the week, down $16.8 billion from the
      prior week

• Total Public Debt

• • • Total public debt outstanding was $33.64 trillion as of November 3, an increase of 7.7% from the previous
      year
    • Debt held by the public was $26.58 trillion, and intragovernmental holdings were $6.84 trillion

• Inflation Factors

• CPI:

• • • • The consumer-price index rose 3.7% in September year over year
      • On a monthly basis, the CPI increased 0.4% in September on a seasonally adjusted basis, after increasing
        0.6% 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 4.1% for the 12 months ending September

• Food and Beverages:

• • • • The food at home index increased 2.4% in September from the same month a year earlier, and increased
        0.1% in September month over month
      • The food away from home index increased 6.0% in September from the same month a year earlier, and
        increased 0.4% in September month over month

• Commodities:

• • • • The energy commodities index increased 2.3% in September after increasing
      • The energy commodities index rose 2.2% over the last 12 months
      • The energy services index 0.1% in September after increasing 0.3% in August
      • The energy services index fell (3.3%) over the last 12 months
      • The gasoline index rose 3.0% over the last 12 months
      • The fuel oil index fell (5.1%) over the last 12 months
      • The index for electricity rose 2.6% over the last 12 months
      • The index for natural gas fell (19.9%) over the last 12 months

• Supply Chain:

• • • • Drewry’s composite World Container Index decreased to $1,406.02 per 40ft container
      • Drewry’s composite World Container Index has decreased by (53.9%) over the last 12 months

• Housing Market:

• • • The shelter index increased 0.6% in September after increasing 0.3% in August
    • The rent index increased 0.6% in September after increasing 0.3% in August
    • The index for lodging away from home increased 0.7% in September after decreasing (4.7%) in August

World News

• Israel/Middle East

  • US Secretary of State Antony Blinken has returned to the Middle East for a second time since the October 7 Hamas attack on Israel, as the Biden administration continues to advocate for a humanitarian pause to the conflict between Israel and Hamas, to allow fuel and life-saving aid to enter the war-torn Gaza Strip
  • Israel has so far rebuffed the US calls for a pause in fighting. Shortly after Blinken met with Israeli Prime Minister Benjamin Netanyahu and his war cabinet Friday, Netanyahu very publicly rejected the US proposal, saying he would not allow for a ceasefire or a pause until hostages held by Hamas are released
  • Dozens were killed and many more injured in a blast at the Al-Maghazi refugee camp in the central Gaza Strip late Saturday night, according to hospital officials.
  • The explosion in the camp killed 52 people, said Mohammad al Hajj, the director of communications at the nearby Al-Aqsa Martyr’s hospital in Deir Al-Balah. He told CNN that the explosion was the result of an Israeli airstrike

• Ukraine

  • Ukraine’s commander-in-chief has conceded that there have been few gains in Ukraine’s five-month long counteroffensive to retake Russian-occupied territory
  • Ukraine has repeatedly said it needs longer-range weapons, more air defenses and its own airpower to be able to fight Russia effectively. While its allies have donated massive amounts of equipment, decisions over further tranches of weaponry, such as tanks, have been slow to materialize

• Russia

  • The United States on Thursday imposed sweeping new measures against Moscow over the war in Ukraine, targeting Russia’s future energy capabilities, sanctions evasion and a suicide drone that has been a menace to Ukrainian troops and equipment, among others, in sanctions on hundreds of people and entities
  • The Biden administration on Thursday added a dozen Russian companies to a trade blacklist for supporting Russia’s military with drones that could be used to aid in Moscow’s invasion of Ukraine

• China

  • After being stuck in a housing downturn for two years, cities across China are giving real-estate developers the go-ahead to cut prices on new homes to revive sales
  • They are quickly running into resistance from homeowners who don’t want to see the values of their properties go down
  • Unlike in the U.S., where home prices are largely determined by market forces, strict government price controls have long been used in China to help prop up real-estate values. Official home-price indexes for major Chinese cities, which climbed for years, have held up remarkably well despite a deep slump in new-home sales

Commodities

• Oil Prices

  • WTI: $80.93 per barrel
    • (5.39%) WoW; +1.55% YTD; (8.21%)YoY
  • Brent: $85.22 per barrel
    • (5.81%) WoW; +1.39% YTD; (9.98%)YoY

• US Production

  • U.S. oil production amounted to 13.2 million bpd for the week ended October 27, down 0.0 million bpd from the prior week

• Rig Count

  • The total number of oil rigs amounted to 618, down 7 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 421.9 million barrels, down (3.4%) YoY
    • Refiners operated at a capacity utilization rate of 85.4% for the week, down from 85.6% in the prior week
    • U.S. crude oil imports now amount to 6.013 million barrels per day, down (3.5%) YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.44 per gallon in the week of November 3, down (9.3%) YoY
      • Gasoline prices on the East Coast amounted to $3.44,up (5.0%) YoY
      • Gasoline prices in the Midwest amounted to $3.33, down (10.4%) YoY
      • Gasoline prices on the Gulf Coast amounted to $3.05, down (6.3%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.70, down (5.2%) YoY
      • Gasoline prices on the West Coast amounted to $4.85, down (5.7%) YoY
    • Motor gasoline inventories were down by 0.1 million barrels from the prior
    • Motor gasoline inventories amounted to 223.5 million barrels, up 8.2%
    • Production of motor gasoline averaged 9.49 million bpd, up 0.1% YoY
    • Demand for motor gasoline amounted to 8.697 million bpd, up (0.4%) YoY

  • Distillates

    • Distillate inventories decreased by -0.8 million in the week of November 3
    • Total distillate inventories amounted to 111.3 million barrels, up 4.2% YoY
    • Distillate production averaged 4.580 million bpd, down (10.5%) YoY
    • Demand for distillates averaged 3.682 million bpd in the week, down (13.5%) YoY

  • Natural Gas

    • • Natural gas inventories increased by 79 billion cubic feet last week
      • Total natural gas inventories now amount to 3,779 billion cubic feet, up 7.9% YoY

    

Credit News

High yield bond yields decreased 64bps to 8.81% and spreads tightened 42bps to 419bps. Leveraged loan yields decreased 30bps to 10.10% and spreads tightened 7bps to 568bps. WTD Leveraged loan returns were positive 30bps. WTD high yield bond returns were positive 258bps. Bonds significantly outperformed loans as benchmark 10yr treasury yields fell 26bps. This major weekly move was in response to perceived dovish Fed commentary, with markets proceeding to price out any further rates hikes.

High-yield:

Week ended 11/3/2023

• 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 10/27/2023

• 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 11/3/2023

• 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

US Retail Q3 2023 Outlook

In Q3 2023, the US retail market showed robust strength, marked by decreasing availability which led to surging rents, and a slowdown in construction and leasing velocity
US Retail Q3 2023 Net Absorption

• Net absorption increased by 34% Q-o-Q to 9.8 million sqft, showing strong tenant demand
• Availability rate fell by 10 bps in Q3 to 4.8% the lowest level since 2005
• Total new space delivered in Q3 fell by 28% Q-o-Q to just under 5.6 million sqft, the second lowest total on record

Manhattan

Manhattan Retail Q3 2023 Leasing Velocity

• The leasing velocity (renewals and new leases) in Manhattan totaled 2.8 million sqft, a 2.6% quarterly and 17% annual decrease
• Asking rent in Manhattan reached $663 per sq ft up 2.7% Q-o-Q and 9.2% Y-o-Y