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Thu, December 11, 2025

Systematic Credit and Equity G-255 Trading Indicators for December 11, 2025

Wednesday's trading session was less active than Monday and Tuesday, with the market reaction to a third -25 bp rate cut muted. We track UST moves relative to US Federal Reserve overnight rate cuts (page 3). The overall reaction by both the UST and USD corporate bond markets outside of 3 years in maturity has driven spectacular 1-year returns in 2025. At the same time, overall 10Y credit spreads are wider YoY.

Will the Rate Cut Help The US Economy?

The systematic trading model doesn't forecast results; it creates trading indicators in reaction to output. Quantitatively speaking, US freight carloads are the single most correlated data point to US GDP. Those numbers are at post-COVID weak levels. The US economy is clearly slowing. However, as the UST and corporate bond spread data indicate, the -25 bp Fed Funds rate cut is most likely more beneficial to the wealthy (hedge funds and financial borrowers with access to a Fed Funds borrowing base) than to any other part of the US economy.

Oracle Earnings and Jeffrey Vinik (again)

A few weeks ago, I wrote about a Junior Analyst meeting in Fidelity's headquarters in 1992 where Jeff Vinik — long before it became fashionable — proclaimed "stock price movement is determined by whether the company beats analyst earnings expectations." He was correct 32 years ago and he is correct now. However, it's not all bad for Oracle (Baa2/BBB short credit/long equity). Yes, last night's earnings result trailed analysts' expectations and the stock traded down -5% in the aftermarket. But overall Oracle revenue and earnings growth is accelerating.

Top G-255 Equity Sector long Indicator? BBB+ TMT

We like to call it the communications / "low-tech" sector. It's the 8 largest non-single-A rated TMT issuers in the G-255 index. All 8 of the equities are seen as long trade indicators. 6 of the 8 stocks trade below their systematic model attractive long trade levels.

G – 255 BBB+ TMT Sector Balance Sheet

And while shareholder returns have grown +23.5% YoY, the BBB+ TMT balance sheet did not add net debt in the most recent reported quarter.

Which implies? More increases in capital returns to shareholders in this sector.

G – 255 Systematic Credit Model Trading Allocation Shift


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The model had maintained the same trading allocation indicator for 7 weeks. A second straight week of High Yield corporate ETF outflow and a second-in-five-week outflow for Investment Grade ETFs, combined with over $1.5 trillion of G-255 short indicators, led to a lowering of long trade and raising of short trade allocation overnight.

Broadcom (AVGO A3/A- long credit / equity) reports this evening. Let's do it again tomorrow.

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

We saw outflows in both High Yield and Investment Grade corporate bond ETFs in the week ended December 9. With G-255 credit near 3-month tight spreads, the Systematic trading model trade allocation indicator changes from 47.5% long to 45% long and from 32.5% short to 35% short. G-255 equities remain attractive and G-255 USD credit more overvalued, with communications and "low-tech" issuers the most attractive. 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.

  • Top traded IG G – 255 issuer: JP Morgan (A1/A short credit/ long equity) unchanged Wednesday

  • Top Traded HY G – 255 issuer: Venture Global (VENLNG B1/BB) tighter Wednesday

Key Trading indicator economic results:

  • For the week ending December 6, total U.S. weekly rail traffic was 508,999 carloads and intermodal units, down -2.3% compared with the same week last year.

  • Total carloads for the week ending December 6 were 228,823 carloads, up 1.7% with the same week in 2024, while U.S. weekly intermodal volume was 280,176 containers and trailers, down -5.4% compared to 2024.

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G-255 Credit Market Valuation and New G – 255 Supply December 11

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

  • UST 10-Year Rates: Down -15.0 basis points (bp) year-over-year (YoY) and -44.7 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 -15 bp YoY, while 5-year UST rates are down 42 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 Wednesday

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.

Investments in US-listed fixed income exchange-traded funds expanded 25% in the past week for the 35th straight week of inflows. Broad bond-market ETFs led the inflows. Corporate bond ETFs had the biggest change from the previous week.

Broad bond-market ETFs expanded by $1.01b to $4.32b

Corporate bond ETFs swung by $2.07b to outflows of $247.8m

Investment-grade ETFs expanded by $73.1m to $1.4b,

High-yield ETFs dropped by $427.5m to $1.17b

• Dedicated Investment Grade corporate bond ETFs had net outflow of -$989million (vs inflow +$509 last

week).

• Dedicated High Yield corporate ETFs had net outflows of -$711 million vs. (–$285 million last

week).

iShares 0-3 Month Treasury Bond ETF had the biggest inflow, of $1.52b

iShares iBoxx $ Investment Grade Corporate Bond ETF had the biggest outflow, of $916.6m

One additional November 2025 G-255 new issue, one from October, and one from August hit their model-defined "avoid" levels on Wednesday. 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 11

  • Attractive Long Credit Indicators: 81, (+15 from Wednesday and -25% below the 200-day moving average of all long indicators).

  • Attractive Long Credit Market Cap accounts for: 48% of all undervalued Systematic Credit capital.

  • Attractive Short Credit Indicators 995, (-5 from Wednesday and +92% 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 Wednesday. The two markets have directionally correlated in 14 of the past 19 trading days.

  • US equities are +1% 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 11

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

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

• Attractive Short Equity Trade Indicators 10, (+2 from Wednesday) and -6% 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 Wednesday:

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)

Macquarie Group Ltd (MQG AU) Southern Co/The (SO) Unilever PLC (UNA NA)

Kroger (KR)

  • Equities leaving highest ranked long indicators on Wednesday: Altria (MO)

G -255 Issuer News Wednesday

Starbucks (SBUX Baa1/BBB+ short credit/long equity) is being sued by Florida over allegedly "invidious and unlawful" hiring quotas based on race, according to a lawsuit filed by Florida Attorney General James Uthmeier on Wednesday.

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G-255 Specific Credit Sector Indicators December 11

Long Opportunities:

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

  • Valuation Insight: The stochastic credit trading model identifies 156 undervalued bonds ($270 billion market

value), with 81 long trade indicators across the 6,000-bond USD universe.

  • At present Single A and BB rated TMT and Single A rated Healthcare are the only sectors with 10 or more long trade indicators.

Short Opportunities

  • 1,539 bonds ($2.639 trillion) are overvalued per the stochastic credit trading model, with 990 short trade indicators.

  • U.S. Big 6 Banks: 306 bonds ($763 billion) are overvalued with 215 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: 166 bonds ($178 billion) are overvalued, with 134 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 11

  • 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. Celanese (Ba2/BB) CE 7 02/15/31 and Capital One (Baa1/A-) COF 5.197 09/11/36 new issue trade indicators both reached their avoid trading levels Wednesday 12/10.

  • 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 11

Systematic Trading Indicators Wednesday: Celanese (Ba2/BB) CE 7 02/15/31 and Capital One (Baa1/A-) COF 5.197 09/11/36 new issue trade indicators both reached their avoid trading levels.

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G-255 Credit Basket Trade Statistics

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

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – December 10, 2025)

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

  • Long Indicators: 129/147 reached avoid-trading levels, tightening by -9.13 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: ± 6.79 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.