Tuesday's trading session was active and volumes were normal. Markets are aware of today's Fed meeting, but there were no major moves in anticipation of the meeting's outcome. High-yield credit was slightly better, while USD investment-grade credit and USD equity markets were, on the whole, unchanged. We saw another material trading indicator change overnight as US Big 6 bank credit has again reached its short valuation range. All 6 bank equities remain long trade indicators, with those issuers reporting 4Q results during the third week of January.

We hear quarterly results from Oracle (ORCL Baa2/BBB; short credit/long equity) this evening. This should have a material impact on the BBB+ TMT sector trading as well as the equity markets.

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Sector returns to shareholders (Part 2).

We've prepared the second set of 5 sector overviews of returns to shareholders. For these five sectors, returns to shareholders rose 12% while revenue rose just over 2%, and that includes a -15% YoY capital return decline from the UK banking sector.

The single-A rated industrials sector has had negative revenue and profit growth, yet returns to shareholders are up 11% YoY. Keep in mind that Berkshire Hathaway (BRK/B), which does not return any capital to equity holders and is the largest constituent of the single-A-rated industrials trading sector, accounts for 22% of the group's total revenue and 40% of that sector's net income. Away from Berkshire, the sector is paying out 100% of its profits in capital returns to shareholders.

Tuesday G-255 Credit Trading and Tuesday G – 255 Sector Trade Indicators

Post Tuesday's USD risk trading, G-255 equities remain attractive and G-255 USD credit more overvalued, with Big 6 banks back to a short sector trade indicator. US Utilities and USD BB TMT are more attractive G-255 long-equity trading sectors. Credit continues to be overvalued per the G-255 stochastic trading model. Percentage trade indicators have remained unchanged for a 34th consecutive trading day. We have not yet seen sufficient movement in valuations (equities or credit) or in incoming/outgoing ETF and mutual fund flows to trigger a new trading allocation from the model.

Top traded IG G – 255 issuer: JP Morgan (A1/A short credit/ long equity) (-1 to -3bp) Tuesday

• Top Traded HY G – 255 issuer: Level 3 Fin (LVLT Caa1/CCC) tighter Tuesday

Key Trading indicator economic results:

• Same-store sales rose 5.7% in the Dec. 6 week compared to a year earlier, Johnson Redbook says.

• Job openings rose by 12,000 to 7.67m mom in October.

• Job openings rate was 4.6% in Oct. vs 4.6% in September.

• 2.941m people quit a job in Oct. vs 3.128m in September

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G-255 Credit Market Valuation and New G – 255 Supply December 10

On a Risk/Reward basis, High Yield bonds have far outperformed Investment Grade in 2025

• UST 10-Year Rates: Down -5.0 basis points (bp) year-over-year (YoY) and -39.3 bp year-to-date (YTD). Spreads reached their tightest point of the year on Friday, February 21, 2025, and widest on Thursday, April 10, 2025.

• Despite the U.S. Fed funds rate declining -75 bp over the past 12 months, 10-year UST rates have fallen only 5 bp YoY, while 5-year UST rates are down 32 bp YoY. This muted decline in longer-duration UST rates has driven overall credit spreads wider in 2025.

Bloomberg 10Y credit spreads are derived by taking the Moody's index yield and subtracting the UST 10Y YTM.

No New G-255 new issue USD bonds on Tuesday

During the month of December, 8 G-255 issuers sold 19 bonds totaling $21.2 billion, again led by the Single-A-rated pharma producer Merck (Aa3/A+), which sold $8 billion in an 8-part deal.

In 2025, there were 325 G-255 USD transactions totaling $1.06 trillion — slightly less than in 2024. 55% of the new G-255 supply was sold by non-financial issuers.

One additional November 2025 G-255 new issue, and one from October hit their model-defined "avoid" levels on Tuesday. Across all G-255 new issues, 89% of the indicators have delivered an average return of just under –8 bp over a 34-day holding period. In 2025, 958 of 1,082 bonds issued ($1.122 trillion notional) have triggered avoid signals.

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G-255 Credit and Equity Market Indicators December 10

• Attractive Long Credit Indicators: 64, (-5 from Tuesday and -39% below the 200-day moving average of all long indicators).

• Attractive Long Credit Market Cap accounts for: 44% of all undervalued Systematic Credit capital.

• Attractive Short Credit Indicators 995, (-2 from Tuesday and +94% above the 200-day moving average of all model short trade indicators).

• Attractive Short Credit Market Cap accounts for: 65% of all overvalued Systematic Credit capital.

G-255 Equity Trade Indicators and US Equity Correlation to Overall US Credit Spreads

US equities and credit markets traded in similar directions with credit spreads unchanged and US equity prices unchanged Tuesday. The two markets have directionally correlated in 13 of the past 18 trading days.

• US equities are +1.8% over the past month; US credit spreads remain slightly wider MoM.

• 2025 is on track for the second-weakest year in 32 for USD credit-equity correlated movement—historic 80% vs. ~74.5% this year.

Systematic Equity Trading Indicators December 10

• Attractive Long G-255 Equity Trade Indicators: 66 (includes both undervalued and equities priced at

extreme discount (unchanged from Tuesday and roughly the 200-day moving average of all long-trade indicators).

• Attractive Short Equity Trade Indicators 8, (+1 from Tuesday) and -18% to the 200-day moving

average of all model short trade indicators).

• Why are G-255 equity issues outperforming the S&P and Dow? A: Over 30% of the 242 publicly traded G -255 equities have already reached their 2025 low price and 40% of the G-255 issuers are non – US corporates.

• G-255 issuers are returning more capital to shareholders (via dividend growth and share repurchase) than S&P issuers as a whole.

• Highest ranked equity long indicators on Tuesday:

Meta Platforms Inc (META) Comcast Corp (CMCSA) Walt Disney Co/The (DIS)

Oracle Corp (ORCL) T-Mobile US Inc (TMUS) Home Depot (HD)

Carnival Cruise (CCL) Royal Caribbean (RCL) American Tower (AMT)

Altria (MO) Macquarie Group Ltd (MQG AU) Southern Co/The (SO)

Unilever PLC (UNA NA)

• Equities leaving highest ranked long indicators on Tuesday: None

G -255 Issuer News Tuesday

None

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G-255 Specific Credit Sector Indicators December 10

Long Opportunities:

Focus on de-leveraging issuers, including Single A and BBB-rated TMT, UK Banks, US Regional Banks, Canadian Banks and Floating Rate Notes.

• Valuation Insight: The stochastic credit trading model identifies 152 undervalued bonds ($241 billion market

value), with 66 long trade indicators across the 6,000-bond USD universe.

• At present Single A and BB TMT represent 40% of all systematic credit long trade indicators.

Short Opportunities

• 1,562 bonds ($2.668 trillion) are overvalued per the stochastic credit trading model, with 995 short trade indicators.

• U.S. Big 6 Banks: 318 bonds ($795.3 billion) are overvalued with 208 short trade indicators.

• Single A and BB Energy: No longer a short indicator as of 10/27. Bonds +6 to +14 bp 9/27 -10/27

• Single A Healthcare: No longer a short indicator as of 10/22. Bonds +5.5 to +13 bp 9/22 – 10/22

• Single A Industrials: No longer a short indicator as of 10/22. Bonds +6.5 to +15 bp 9/22 -10/22

• Autos: 160 bonds ($173 billion) are overvalued, with 129 short trade indicators

Systematic Portfolio Daily Trading Model Indicators

• Long Indicators: Target deleveraging new issues with attractive valuations, focusing on 5-year maturities.

• Short Indicators: Target releveraging issuers trading at the deepest discount from their model avoid point, avoiding 7-year maturities due to low attractiveness.

• Replace Longs: Swap long positions that have reached their avoid trading level.

• Portfolio Trading Hurdle: Maintain a 1:1 long-to-short ratio once the 67.5% long position threshold is reached.

• Current Status: Add new supply trades where the issuer is deleveraging; add new issue bonds where spreads widened by +2 basis points.

• Current Status of Trading Indicators: Last week, one short trade and two long trades reached their avoid trading level. The trading model added three long indicators.

Monitor Trade Position Composition:

• Track the percentage of long positions relative to the total portfolio.

• If replacing long positions that have reached their avoid trading level pushes the portfolio above the 65% long hurdle, initiate short positions in releveraging issuers (avoiding 7-year maturities) at a 1:1 ratio for additional long positions.

• Review: Reassess portfolio balance after today's fund flow data to ensure alignment with the systematic strategy.

• Look for individual bond indicators to change overnight: Historic trading levels are leading to overnight adjustments to long, short and avoid indicator levels.

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G-255 Specific Bond Trading Indicators December 10

• Closed Positions: The General Motors (Baa2/BBB) GM 3.6 06/21/30 short trade indicator reached its avoid trading level on Monday 11/24. Florida P&L (Aa2/A+) NEE 5.6 02/15/66 reached its avoid trading level on Friday December 5. Philip Morris (A2/A) PM 4 1/4 10/29/32 and McDonald's (Baa1/BBB+) MCD 4.4 02/12/31 new issue trade indicators both reached their avoid trading levels Tuesday 12/9.

• Enter New Longs: The new Amazon (A1/AA) AMZN 4.35 03/20/33 was added to the Model Trade on Monday 11/17. On Tuesday December 2, the Florida Power & Light (Aa2/A+) NEE 5.6 02/15/66 and on Wednesday December 3, Celanese (Ba2/BB+) CE 7 02/15/31 were added as new issue long indicators.

• Enter New Short Trades: The trading model added BP (A2/A) BPLN 4.893 09/11/33 as a short trade on Thursday 11/20, the Toyota (A2/A) TOYOTA 4.8 01/05/34 Monday 11/21 and the CVS (Baa3/BBB) CVS 1 3/4 08/21/30 on Monday 11/24. The model again produced a short trade indicator for General Motors (Baa2/BBB) GM 3.6 06/21/30 on Monday 12/8/25.

Current Sample Systematic Basket bond trades based on trading strategy December 10

Systematic Trading Indicators Tuesday: Philip Morris (A2/A) PM 4 1/4 10/29/32 and McDonald's (Baa1/BBB+) MCD 4.4 02/12/31 new issue trade indicators both reached their avoid trading levels. 6

G-255 Credit Basket Trade Statistics

Tuesday's Basket Trade Long/Short Ratio: 67%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – December 9, 2025)

Performance Summary: Total Trades: 192 (1% of total trade indicators).

• Long Indicators: 127/147 reached avoid-trading levels, tightening by -9.18 bp.

• Short Indicators: 36/45 reached avoid-trading levels, widening by +5.85 bp.

• Remaining Longs: 20 tightened by -2.88 bp.

• Remaining Shorts: 9 tightened by -16.52 bp.

• Average Spread Movement: ± 6.69 bp in the indicated direction.

• Success Rate: 85% of indicators reached avoid-trading levels, which is slightly below normal.

• Average trade holding period: 22.9 days (above average)

Disclaimer - This report is not intended as, and does not constitute an offer, or a solicitation to buy or sell any securities or financial instruments. All data, levels, opinions, and representations herein are provided for informational purposes only and should not be relied upon for making investment decisions. Past performance is not indicative of future results. The authors of this report assume no liability for losses or damages arising from the use of this information. Investors should consult with a qualified financial advisor before making any investment decisions. The information in this report is based on sources believed to be reliable, but no guarantee is made as to its accuracy, completeness, or timeliness.