U.S. News

ISM Services

• ISM services index rose to 54.1 in December, signaling stronger business activity, with a notable increase in the prices-paid index to 64.4, the highest since early 2023
• Rising costs and resilient demand in the service sector are raising concerns about persistent inflation
• While the services sector showed growth, manufacturing struggled, with ISM’s gauge indicating contraction for the 9th straight month due to a strong dollar and tariff concerns

U.S. Unemployment Report

• U.S. nonfarm payrolls increased by 256k in December, surpassing expectations, while the unemployment rate fell to 4.1%
• Average hourly earnings rose 3.9% YoY, slightly slowing from November’s 4.0%
• While inflation concerns persist, the labor markets strength supports consumer spending and broader economic expansion

Wholesale Inventories

• U.S. wholesale inventories dipped by 0.2% in November, in line with estimates
• November’s decline was driven by a 0.4% fall in durable goods inventories, partially offset by a 0.2% increase in non-durable goods inventories
• Wholesale sales increased by 0.6% in November, with durable goods sales jumping 1.5% but non-durable sales slipping 0.3%

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased to 201,000 in the week ended January 3, down 10,000 from the prior week.
• The four-week moving average was 213,000, down 10,250 from the prior week.
• Continuing claims – those filed by workers unemployed for longer than a week – increased by 33,000 to 1.867 million in the week ended December 27. This figure is reported with a one-week lag.



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $6.854 trillion in the week ended January 10, up $1.1 billion from the prior week.
• Treasury holdings totaled $4.291 trillion, down $12.8 billion from the prior week.
• Holdings of mortgage-backed securities (MBS) were $2.23 trillion in the week, down $12.7 billion from the prior week.



Total Public Debt

• Total public debt outstanding was $36.17 trillion as of January 10, an increase of 6.2% from the previous year.
• Debt held by the public was $28.83 trillion, and intragovernmental holdings were $7.38 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) rose 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
• 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 $3,986.48 per 40ft
• Drewry’s composite World Container Index has increased by 29.8% 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%, flat 0.00% year to date.

World News

Middle East

• Arab states, led by Saudi Arabia, are providing aid and seeking influence in post-Assad Syria to counter rivals like Turkey and Iran, while addressing concerns about the Islamist-led government’s stability and potential regional impact
• Western powers remain cautious, maintaining sanctions and monitoring the new regime’s inclusivity and governance
• Lebanon’s Parliament elected U.S.-trained General Joseph Aoun as president, ending a two-year vacancy and signaling Hezbollah’s diminished influence after the war with Israel
• Aoun’s election marks a shift in Lebanese politics, with regional powers supporting him amid concerns over Hezbollah’s power and instability

Europe

• Eurozone business sentiment dropped in December due to industrial struggles, political instability, and potential U.S. tariffs, with the Economic Sentiment Indicator falling to 93.7
• Confidence weakened most in France and Germany, particularly in the manufacturing sector, while the services sector showed moderate improvement
• Elon Musk has stirred controversy in Europe with political interventions, supporting far-right parties and making inflammatory social media posts, challenging European leaders
• Elon Musk has specifically supported Germany’s far-right AfD party ahead of the February election, calling it “the last spark of hope for the country”. He also criticized the British prime minister, Keir Starmer, accusing him of spreading misinformation

China

• China’s yuan has weakened 1.3% against the dollar since December, approaching a 16-month low, with economists predicting it could end the year at its weakest level in nearly two decades
• The currency’s decline is driven by concerns over President-elect Trump’s potential tariffs, speculation that China’s central bank might allow further depreciation, and weak economic conditions
• China’s consumer prices grew only 0.2% in 2024, with weak inflation continuing due to a sluggish property sector and cautious consumer spending.
• The government is expected to boost consumption through subsidies and fiscal support, while the central bank may cut rates further to address ongoing deflationary pressures

U.K.

• Yields on U.K. government debt surged to their highest levels since 1998, while the British pound fell against the dollar, driven by concerns over rising government borrowing, weak demand for gilts, and a sluggish economy, with investors fearing that further borrowing could strain public finances

Japan

• The Biden administration’s decision to block Nippon Steel’s acquisition of U.S. Steel on national-security grounds has strained U.S.- Japan relations, risking a chilling effect on Japanese investment in the U.S. and undermining cooperation against China, despite the deep economic ties and progress in market reforms between the two countries

Sudan

• The U.S. has officially declared that Sudan’s Rapid Support Forces (RSF) and its militias committed genocide during the ongoing civil war, citing ethnically targeted violence, and mass murders against specific ethnic groups, leading to tens of thousands of deaths and widespread famine

South Korea

• South Korean police raided the offices of Jeju Air and Muan International Airport following the December 29, 2024, crash of a Boeing 737-800 that killed 179 people. The investigation focuses on professional negligence, the flight’s final moments, and airport safety protocols

Germany

• Germany’s adjusted unemployment rate remained steady at 6.1% in December 2024, despite ongoing job loss threats from major manufacturing companies like Thyssenkrupp, Bosch, and Schaeffler

Ghana

• A fire destroyed two-thirds of Accra’s Kantamanto secondhand clothing market, affecting around 8,000 people and causing significant economic losses for thousands of traders

India

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

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

Commodities

Oil Prices

• WTI: $76.57 per barrel
• 3.53% WoW; 6.76% YTD; 7.29% YoY
• Brent: $79.79 per barrel
• 4.29% WoW; 6.90% YTD; 3.89% YoY

US Production

• U.S. oil production amounted to 13.6 million bpd for the week ended January 3, down 0.0 million bpd from the prior week.

Rig Count

• The total number of oil rigs amounted to 584, down 5 from last week.

Inventories

• Crude Oil

• Total U.S. crude oil inventories now amount to 414.6 million barrels, down (4.1%) YoY.
• Refiners operated at a capacity utilization rate of 93.3% for the week, up from 92.7% in the prior week.
• U.S. crude oil imports now amount to 6.926 million barrels per day, down 3.0% YoY.

• Gasoline

• Retail average regular gasoline prices amounted to $3.07 per gallon in the week of January 10, down (0.3%) YoY.
• Gasoline prices on the East Coast amounted to $3.10, down (2.7%) YoY.
• Gasoline prices in the Midwest amounted to $3.02, up 6.1% YoY.
• Gasoline prices on the Gulf Coast amounted to $2.76, down (0.4%) YoY.
• Gasoline prices in the Rocky Mountain region amounted to $3.02, up 5.0% YoY.
• Gasoline prices on the West Coast amounted to $3.93, down (6.5%) YoY.
• Motor gasoline inventories were up by 6.3 million barrels from the prior week.
• Motor gasoline inventories amounted to 237.7 million barrels, down (3.0%) YoY.
• Production of motor gasoline averaged 8.88 million bpd, down (8.0%) YoY.
• Demand for motor gasoline amounted to 8.481 million bpd, up 1.9% YoY.

• Distillates

• Distillate inventories decreased by 6.1 million in the week of January 10.
• Total distillate inventories amounted to 128.9 million barrels, down (2.6%) YoY.
• Distillate production averaged 5.204 million bpd, up 0.7% YoY.
• Demand for distillates averaged 3.178 million bpd in the week, down (7.4%) YoY.

Natural Gas

• Natural gas inventories decreased by 40 billion cubic feet last week.
• Total natural gas inventories now amount to 3,373 billion cubic feet, up 1.1% YoY.

Credit News

High yield bond yields remained unchanged at 7.38% and spreads decreased 6bps to 298bps. Leveraged loan yields increased 2bps to 8.81% and spreads decreased 3bps to 472bps. Weekly returns were positive, up 15bps for leveraged loans and 13bps for high-yield bonds. The 10-year Treasury yield rose 11bps to 4.68%. High-yield bond spreads narrowed slightly after December’s rise, driven by solid economic data. Leveraged loans gained in early January as strong data and lower Fed easing expectations boosted demand for floating-rate assets. Investors await next week’s US CPI, earnings season kickoff, and Trump’s January 20 inauguration.

High-yield:

Week ended 01/10/2025

• 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 01/10/2025

• 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: The Container Store ($163mn, 12/22/2024), Party City ($264mn, 12/21/2024), 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), and Accuride ($291mn, 10/11/2024).

CLOs:

Week ended 01/10/2025

• 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

ZCGC RE Research

• Office CMBS Delinquency Rate Climbs to a Record 11% tgages are considered delinquent when landlords fail to make interest payments after the 30-day grace period.



• The delinquency rate for office mortgages securitized into commercial mortgage-backed securities (CMBS) reached a record 11.0% in December, surpassing the 10.7% peak during the Financial Crisis.
• Over the past 24 months, the delinquency rate for office CMBS has risen sharply, increasing by 9.4 percentage points from 1.6% to 11.0%.
• The office sector in commercial real estate is in a severe downturn, with an additional $2 billion in CMBS office debt becoming newly delinquent in December.
• Comparisons to other major sectors reveal lower delinquency rates:
• Lodging: 6.1%
• Retail: 7.4%
• Multifamily: 4.6%
• Industrial: 0.3%
• Older office buildings are facing the most problems, as high vacancy rates in newer buildings allow companies to relocate, leaving older buildings with few replacement tenants.
• Vacancy rates in older buildings are skyrocketing, and landlords are unable to refinance or sell, as property values for older towers have dropped by 50-70%.