— August US Core CPI Rises Faster; Wall Street Sells $1.35B in Leveraged Loans; Blackstone Restructures Credit Unit; Citi Unveils Biggest Overhaul in 15 Years; US Federal Budget Deficit Widens; Adobe Launches AI Image Generator; Commercial Real Estate Broker Stocks Tumble
1. August US Core CPI Rises Faster
The U.S. Bureau of Labor Statistics reported today that core CPI, excluding food and energy, rose 0.3% month-on-month in August — the first acceleration since February.
Due to recent energy price increases, overall CPI rose 0.6% month-on-month.
Year-over-year, core CPI rose 4.3%, in line with expectations and the slowest increase in two years.
However, the latest data suggests the Federal Reserve may need to raise rates once more this year. Traders currently expect no hike in September, but place the odds of a November hike at around 50%.
Economists regard core CPI as a better gauge of inflation trends.
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2. Wall Street Sells $1.35B in Leveraged Loans
Amid rising demand for high-risk bonds, a group of banks led by Bank of America and JPMorgan is attempting to offload $1.35 billion in acquisition debt tied to satellite firm Inmarsat.
Sources say the banks are marketing $617 million in leveraged loans due May 2030, and $733 million in unsecured junk bonds, priced at 70 cents on the dollar, offering a 14% yield.
According to Morningstar LSTA, U.S. leveraged loan prices have reached their highest since May 2022, with average pricing around 96 cents on the dollar.
As of Tuesday, average junk bond yields held steady at 8.54%.
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3. Blackstone Restructures Credit Unit
Blackstone recently announced a major restructuring of its credit division. The firm will consolidate its corporate credit, asset-based finance, and insurance asset management divisions.
Gilles Dellaert, 44, head of the insurance group, will be promoted to lead the newly merged division.
Current head Dwight Scott will become chairman of the credit group, focusing on client management and European strategy.
The consolidated division manages $300 billion in assets, with a goal of reaching $1 trillion over the next decade.
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4. Citi Unveils Biggest Overhaul in 15 Years
Citigroup announced today that it will eliminate the structure of three regional heads overseeing operations across 160 countries.
Going forward, Citi will retain five core businesses: Services, Markets, Personal Banking, Banking, and Wealth Management.
Four top executives will take on new roles, and the company is seeking a new head for its banking division.
A new round of layoffs is also planned. CEO Jane Fraser said parting with many hardworking employees is “deeply difficult.”
Since Fraser took over in early 2021, Citi’s stock has fallen 40%, performing twice as poorly as peers.
Citi shares rose 2% today.
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5. US Federal Budget Deficit Widens
Today’s Treasury report showed the U.S. government posted an $89.2 billion budget surplus in August, boosted by $319 billion in student loan-related income.
For the first 11 months of fiscal 2023, the federal budget deficit reached $1.52 trillion — a 60% increase year-over-year.
The government paid $808 billion in interest on debt, up 19% from a year earlier.
Total government spending over the 11-month period reached $5.5 trillion, a 3% increase driven by higher Social Security, defense, and healthcare costs.
Meanwhile, total revenue fell 10% year-over-year to $3.97 trillion.
The 2024 fiscal year begins on October 1.
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6. Adobe Launches AI Image Generator
Adobe Inc. announced that Creative Cloud subscribers will now have access to its AI-powered image generator, Firefly.
Top-tier subscribers can generate up to 3,000 images per month using Firefly.
As a software provider for creators, Adobe believes integrating AI into its products offers a competitive edge.
Firefly’s per-image generation cost is reportedly lower than OpenAI’s DALL·E.
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7. Commercial Real Estate Broker Stocks Tumble
Shares of commercial real estate brokerages slumped today, with CBRE, JLL, and Cushman & Wakefield falling 8.1%, 10%, and 6%, respectively.
Rising interest rates have significantly slowed the commercial real estate market. The latest CPI data suggests the Fed may raise rates again this year.
CBRE CFO Emma Giamartino said the market environment is “very challenging” and expects third-quarter EPS to decline 16–19%.
Higher borrowing costs have slowed deal activity, cutting off a key source of revenue for brokers.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.