U.S. News

Consumer Price Index

• The consumer price index increased 0.2% in October, meeting forecasts. The core inflation rate rose 0.3% for the third straight month
• The yearly rate of inflation increased from 2.4% to 2.6%, marking the first increase in seven months. The year-over-year core inflation rate was unchanged at 3.3%, still above the Fed’s target of 2%
• The Federal Reserve is still expected to reduce interest rates in December, though it is now more likely that the Federal Reserve pauses rate-cuts in early 2025

Producer Price Index

• The producer price index rose 0.2% in October, meeting forecasts. Core wholesale prices increased 0.3% in October
• The increase in wholesale prices in the last twelve months ended in October climbed from 1.9% to 2.4%, reaching the highest level in four months. Core wholesale prices moved from 3.3% to 3.5% over the same period
• Wholesale services, such as transportation and recreation, are the largest sources of inflation. Services are up 3.5% in the past year

U.S. Retail Sales

• Retail sales increased 0.4% in October, above the 0.3% forecasted by economists
• Auto sales, which account for one fifth of retail sales, rose by 1.6% in October
• Restaurant sales, an indicator of expendable income among consumers, increased by 0.7% over the same period

Jobless Claims

• Initial jobless claims, a measure of how many workers were laid off across the U.S.,
  increased to 217,000 in the week ended November 8, down 4,000 from the prior week
• The four-week moving average was 221,000, down 6,250 from the prior week
• Continuing claims – those filed by workers unemployed for longer than a week – decreased by 11,000 to 1.873 million in the week ended November 1. This figure is reported with a one-week lag



Fed’s Balance Sheet

• The Federal Reserve’s assets totaled $6.967 trillion in the week ended November 15, down $27.2 billion from the prior week
• Treasury holdings totaled $4.340 trillion, up $0.2 billion from the prior week
• Holdings of mortgage-backed securities (MBS) were $2.27 trillion in the week, down $1.8 billion from the prior week



Total Public Debt

• Total public debt outstanding was $35.97 trillion as of November 15, an increase of 6.6% from the previous year
• Debt held by the public was $28.63 trillion, and intragovernmental holdings were $7.38 trillion



Inflation Factors

CPI:

• The consumer-price index rose 2.6% in October year over year
• On a monthly basis, the CPI increased 0.2% in October on a seasonally adjusted basis, after increasing 0.2% in September
• The index for all items less food and energy (core CPI) rose 0.3% in October, after rising 0.3% in September
• Core CPI increased 3.3% for the 12 months ending October

Food and Beverages:

• The food at home index increased 1.1% in October from the same month a year earlier, and increased 0.1% in October month over month
• The food away from home index increased 3.8% in October from the same month a year earlier, and increased 0.2% in October month over month

Commodities:

• The energy commodities index decreased (1.0%) in October after decreasing (4.0%) in
• The energy commodities index fell (12.4%) over the last 12 months
• The energy services index (0.4%) in October after increasing 0.4% in September
• The energy services index rose 4.0% over the last 12 months
• The gasoline index rose (12.2%) over the last 12 months
• The fuel oil index fell (20.8%) over the last 12 months
• The index for electricity rose 4.5% over the last 12 months
• The index for natural gas fell 2.0% over the last 12 months

Supply Chain:

• Drewry’s composite World Container Index decreased to $3,440.48 per 40ft container
• Drewry’s composite World Container Index has increased by 134.2% over the last 12 months

Housing Market:

• The shelter index increased 0.4% in October after increasing 0.2% in September
• The rent index increased 0.4% in October after increasing 0.2% in September
• The index for lodging away from home decreased (3.4%) in October after decreasing (3.8%) in September

Federal Funds Rate

• The effective Federal Funds Rate is at 4.58%, down (0.75%) year to date

World News

• Middle East

  • In a previously unreported message, Iran sent written communication to the Biden administration assuring that it will not attempt to assassinate President-elect Donald Trump. The message came in response to a warning sent by the Biden administration in September, indicating that any more Tehran-backed assassination attempts would be treated as an act of war. The Justice Department last week outlined allegations that Iranian agents were involved in ongoing efforts to target Donald Trump
  • The longtime CEO of Saudi Arabia’s Neom, the country’s planned futuristic city, left his position abruptly. The reason for the departure is unknown, though delays, cost overruns, and staff turnover have plagued the development project. Executives from the country’s sovereign-wealth fund are coming in to take greater control over the project
  • Hamas and Fatah, rival Palestinian political factions, have agreed to create an apolitical committee to oversee aid distribution and rebuilding after major fighting stops. The arrangement would be temporary, in place until Gaza is stable enough to hold elections
  • Israeli forces are expanding the ground invasion of Lebanon, even as the opposing parties come closer to reaching a ceasefire. Experts state that the targeting of Hezbollah strongholds in Southern Lebanon will give Israel more leverage in the negotiations. Since the ground invasion began, the Israeli military has killed hundreds of Hezbollah militants, destroyed underground fortifications, and seized small arms and larger weapons systems

• Russia

  • In response to high casualty numbers in Ukraine, Russia is offering salaries over five times the average in some of the country’s poorest regions. In addition, the families of those killed in action will receive large compensation payments from the government
  • Economists, who describe the policy as “deathonomics”, note that a thirty-five-year-old solider who fights one year and is then killed in action would make more money through salary and bonus payouts than he could expect for the rest of his working life
  • Russia launched a major missile and drone attack on Ukraine overnight into Sunday. The barrage, which targeted power plants and energy infrastructure, was the largest since August and the third largest of this year. Ukraine reported that five people were killed
  • Ukraine attacked Moscow last Sunday with at least 34 drones, the largest drone strike on the Russian capital since the start of the war. The attack diverted flights from three of the city’s major airports and injured at least five people

• China

  • China’s air force showcased a new suite of aircraft during its premier airshow, unveiling the latest effort to catch up to the United States technologically. Beijing states that the new armaments will allow China to better protect its interests in the Western Pacific
  • China’s industrial production slowed slightly in October, but retail sales rose. Most economists now think China’s economy is set to meet the goal of 5% growth this year
  • 8 people were killed and 17 wounded in a knife attack Saturday at a college in Eastern China. The attack was conducted by a student that did not graduate after failing an exam. This is the latest of such violent public safety concerns; on Tuesday, a 62-year-old drove an SUV into a crowd at a sports stadium, killing 35 and injuring dozens more
  • Xi Jinping offered a public response to the recent violence, ordering authorities to learn from recent events and ensure public safety and social stability. China’s Ministry of Public Security held a meeting in Beijing, vowing to guard against such violence and to address these conflicts at the grassroots level

• France

  • After Israeli fans were targeted in Amsterdam, France is deploying 4,000 police, including elite tactical officers, and 1,600 private security guards ahead of Thursday’s France-Israel soccer match just outside Paris

• Canada

  • In the latest of a series of labor disruptions, Canadian postal workers initiated a walkout ahead of the holidays, halting most mail delivery in the country.

• UK

  • Archbishop Justin Welby, the leader of the Anglican Communion, resigned after allegations that he failed to respond to accusations against one of the most prolific child abusers in the church’s history

• Haiti

  • A ruling council, which was created to restore order and steer the country toward a democratic transition after the assassination of President Jovenel Moise, fired Prime Minister Garry Conille. The announcement comes after months of political infighting between the former Prime Minister and the council

• Germany

  • Germany’s government is in a political gridlock after a dispute over economic policy between coalition partners. The Free Democratic Party (FDP) is pushing for tax cuts and welfare reductions while the Social Democratic Party (SPD) is advocating for higher government spending, including subsidies for industries and additional support for Ukraine. This gridlock has led to a vote of confidence, potentially resulting in early elections

• Pakistan

  • Pakistan’s government is strengthening its control through new laws that limit judicial power, extend the army chief’s term, and allow detention without charges, amid growing political repression. Despite some economic improvements, the country remains politically unstable

• Mexico

  • Mexico’s Supreme Court narrowly voted against blocking a controversial judicial reform pushed by President Sheinbaum’s government, which would elect judges by popular vote. The reform has sparked concerns over the independence of the judiciary and its potential impact on Mexico’s democracy and business climate

• Spain

  • Following torrential rains and flash floods in the Valencia region of Spain led to at least 214 deaths and significant devastation in towns like Paiporta and Picanya. The Spanish government deployed over 7,500 military personnel, along with 400 vehicles, 30 helicopters, and an amphibious ship, to assist in rescue efforts and restore water, electricity, and telecommunications amid restricted road access and reports of looting

Commodities

• Oil Prices

  • WTI: $67.02 per barrel
    • (4.77%) WoW; (6.46%) YTD; (8.07%) YoY
  • Brent: $71.00 per barrel
    • (3.89%) WoW; (7.84%) YTD; (8.29%) YoY

• US Production

  • U.S. oil production amounted to 13.4 million bpd for the week ended November 8, down 0.1 million bpd from the prior week

• Rig Count

  • The total number of oil rigs amounted to 584, down 1 from last week

• Inventories

  • Crude Oil

    • Total U.S. crude oil inventories now amount to 429.7 million barrels, down (2.2%) YoY
    • Refiners operated at a capacity utilization rate of 91.4% for the week, up from 90.5% in the prior week
    • U.S. crude oil imports now amount to 6.240 million barrels per day, down 2.1% YoY

  • Gasoline

    • Retail average regular gasoline prices amounted to $3.08 per gallon in the week of November 15, down (7.5%) YoY
      • Gasoline prices on the East Coast amounted to $3.11, down (6.2%) YoY
      • Gasoline prices in the Midwest amounted to $2.95, down (9.7%) YoY
      • Gasoline prices on the Gulf Coast amounted to $2.73, down (6.0%) YoY
      • Gasoline prices in the Rocky Mountain region amounted to $3.20, down (7.4%) YoY
      • Gasoline prices on the West Coast amounted to $4.06, down (12.7%)
    • Motor gasoline inventories were down by 4.4 million barrels from the prior week
    • Motor gasoline inventories amounted to 206.9 million barrels, down (4.1%)
    • Production of motor gasoline averaged 10.27 million bpd, up 9.0% YoY
    • Demand for motor gasoline amounted to 9.383 million bpd, up 4.8% YoY

  • Distillates

    • Distillate inventories decreased by -1.4 million in the week of November 15
    • Total distillate inventories amounted to 114.4 million barrels, up 7.4% YoY
    • Distillate production averaged 4.969 million bpd, up 4.5% YoY
    • Demand for distillates averaged 4.098 million bpd in the week, down (0.3%)

  • Natural Gas

    • Natural gas inventories increased by 42 billion cubic feet last week
    • Total natural gas inventories now amount to 3,974 billion cubic feet, up 3.7% YoY

    

Credit News

High yield bond yields decreased 7bps to 7.18% and spreads decreased 9bps to 287bps. Leveraged loan yields decreased 5bps to 8.64% and spreads decreased 5bps to 465bps. WTD Leveraged loan returns were positive 29bps. WTD high yield bond returns were positive 31bps. 10yr treasury yields increased 8bps to 4.42%. Yields and spreads decreased amid receding growth concerns, rising rates, a mostly benign earnings season, and now rising macro visibility following the US election results.

High-yield:

Week ended 11/15/2024

• 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 11/15/2024

• 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: 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), Wheel Pros ($2.8bn, 7/11/24), and Quorum Health Group ($688mn, 7/10/24).

CLOs:

Week ended 11/15/2024

• 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

ZCGC RE Research

Rising Costs Push More Americans to Rent as Homeownership Becomes Less Affordable

• High home prices, mortgage rates, property taxes, and spiking homeowners’ insurance have made home ownership less financially viable, pushing more people toward renting
• The share of people preferring to rent rather than buy hit a record high of 36%, according to Fannie Mae’s survey, surpassing previous highs from the 2010 housing bust

• The surge in home prices since 2020, driven by loose monetary policy, has made it significantly more expensive to buy than rent, leading to a trend of renting as a cost-effective alternative
• Fannie Mae noted a growing preference for renting, expecting modest rent growth in 2025, making rental deals more attractive
• The monthly costs of buying—factoring in mortgage rates, property taxes, and insurance—have far exceeded those of renting, especially with rents rising at a slower pace than home prices
• People are increasingly opting to rent to avoid inflated costs, benefitting from flexibility and saving money rather than becoming “house-poor”

• Declining demand for home purchases has caused supply levels of new and existing homes to spike, with home sales hitting lows unseen since 1995
• Choosing to rent protects people from potential losses if property prices decline, a trend already visible in some markets