Reports Library
Wed, November 26, 2025

Systematic Credit and Equity G-255 Trade Indicators for November 26, 2025

Post Monday and Tuesday articles about G-255 Systematic trade indicator performance for credit and equities, the natural question was "just how did you come up with the G-255?

And the answer is, I didn't. When I initially began my career at Fidelity it was as Director of High Yield and Distressed research, where the de-levering relationship to bankruptcy risk was back – tested and quantified at great expense to Fidelity. It also yielded top decile performance on 1Y, 3Y and 5Y basis. The equity (the most important component in the model did come from me. It came from Abbie Johnson (Yes, that Abbie Johnson) who had developed the "Dividend Growth Fund" on the premise similar to "returns to shareholders" that are in the basis of the G-255 systematic Trading model. Abbie needed someone to back test for her and having moved from HY to equities, I had that task. Clearly, She what the hell she was talking about.

International Components

Three years as Director of Investment Operations stationed in London and frequently visiting Hong Kong and Tokyo, we were able to develop the financial accounting base that is the G-255 using (at the time) 20 different accounting procedures from 20 different countries. We set the initial liquid credit baseline at $10 billion of tradable debt. The rest, as they say, is history. Fidelity poured enormous resources into this. But we came away with what they asked for: a trading model that capitalized on Fidelity's strength – research and rapid reaction to earnings results.

How the G-255 Equity and Credit Systematic Trading Indicators work

Universe Construction and Monitoring: The G-255 focuses on issuers with >$15B in debt outstanding and top-quartile liquidity, ensuring signals are executable in size. Daily monitoring tracks composite spread levels, flagging divergences from fair value. Default probability is set at zero in the G-255 universe owing to the equity price movement in component in the trading model.

Quarterly Recalibration Process: Every earnings cycle (e.g., Q4 2025 recalibration in January 2026), the model standardizes ~1,200 data points per issuer—including leverage ratios, free-cash-flow yield, earnings momentum (YoY EPS growth), and returns to shareholder yield (dividends + buybacks / market cap). Machine learning ranks credit trade indicators based on balance sheet leverage direction and historic wide and narrow credit spreads across the trading curve. The model then ranks them by spread to 52 week mean to create the trading indicator.

On the equity side, post-earnings the systematic trading model looks at 6 variables: revenue growth (second derivative thereof), cash flow growth, free cash flow, returns to shareholders and their respective growth rates, and of course the actual equity price relative to its 52-week trading range. How does the model ordinate the long/short equity trading indicator for the 243 underlying equities of the world's top borrowers? That's top secret.

Valuation Engine: At the issuer level, the model scans the full capital structure (senior secured, unsecured, subordinated bonds; CDS and equities) to identify mispricings. It generates short and long trades based on the attractiveness (long or short) of the issuer curve trade or cash-vs-CDS basis trade/senior-vs-subordinated spreads and where (what price) the equity trades. For example, if a BBB issuer's 5Y CDS implies 200bps default risk The G -255 issuer group has no realistic default risk, so cash vs derivative (equity or CDS) becomes a straightforward algorithmic trade.

Equity-Credit Arbitrage Layer: For the 243 dual-listed issuers (~95% overlap with S&P 500), the model synchronizes signals across asset classes. Equity price moves (e.g., +10% post-earnings) often outpace credit adjustments, triggering pairs like long equity/short CDS when convergence is projected >90% probability. This exploits the ~20-30bps average basis volatility between equities and credit.

.

Signal Timing and Cycle Detection: The composite indicator aggregates issuer indicators (see the sector chart on page 4 inro "Widening or Narrowing Trough. Its hallmark is exact-day accuracy on turns—e.g., signaling the March 2023 banking crisis trough 24 hours before CDX.IG spiked. Thresholds are back tested to eliminate noise, delivering alpha through front-running consensus (e.g., entering longs 5-10 days before equity momentum builds).

Operational Edge: This framework operates as a "black box" REPL-like system It has zero historical false positives on major cycles since launch in ugh 1995, enabling systematic desks to capture 90%+ of moves without human bias.

G-255 Credit Trading Sector Indicators and Tuesday Credit Trading

Despite yesterday's slight rally the widening in overall credit remains the path of least resistance for both credit markets. G-255 equities have from a long only perspective outperformed US equity indices and USD credit. This owes primarily to the % of financials in the G-255 and that 40% of the equities are non - US based. Credit indicators are now (slightly) undervalued for the first time since June. However, absent credit inflow and movement in underlying equity prices, the patch for credit spreads remains the same. No indicator changes in the Systematic Trading Model trade allocation for either credit or equities overnight.

2

G-255 Credit Market Valuation and New G – 255 Supply November 26

Source: Bloomberg Capital Markets

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

  • UST 10-Year Rates: -29.7bp YoY and -56bp YTD. February 21, 2025, was the tightest spread date of 2025.

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

We end November with near record USD G – 255 supply as 24 issuers sold 71 bonds comprising $89.9 billion of market cap led by Pharmaceutical bonds (Single A rated) have not fared well even as the market widening slowed. Roche (ROSW Aa3/AA) came to market selling $1.7 billion of 5Y, 7Y and 10Y paper after Novartis (NOVN.VX Aa3/AA-) and Pfizer (PFE A1/A+) accounted for 12 bonds and just over $11 billion of debt which has not traded well. The Roche deal was scaled down in size, priced more attractively according to the trading model and had no longer-dated bonds, which in the Novartis and Pfizer deals have not traded well.

Thus far only 50% of the USD G-255 bonds issued in November have reached their avoid trading levels. The majority of the bank bonds issued in October are still outside the model's avoid levels where a minimum (-5bp if possible) spread tightening over the next month is expected to occur. 910 of 1069 bonds issued ($1.08 trillion) have reached their avoid trading level in 2025.

We will review the October/November new supply in the next G-255 new supply report.

Of the G-255 bonds issued through November 12, 2025, 906 of 1056 (86%) reached their avoid trading levels.

3

G-255 Credit and Equity Market Indicators November 26

  • Attractive Long Credit Indicators: 93, (-8 from Tuesday and -15% below the 200-day moving average of all long indicators). 18 long credit indicators are not included owing to the underlying equity price declines of more than -10% in the past 30 calendar days.

  • Attractive Long Credit Market Cap accounts for: 26% of all undervalued Systematic Credit capital.

  • Attractive Short Credit Indicators 515, (+82 from Tuesday and +1% above the 200-day moving average of all model short trade indicators).

  • Attractive Short Credit Market Cap accounts for: 33% 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 correlated directionally for a first day in three US equity indexes were materially higher while US credit less than materially better on Tuesday.

  • US equities are now higher WoW; US credit markets remain slightly wider in the week ended November 25

  • US equities are -.4% lower over the past month, US credit spreads are now materially wider MoM.

  • 2025 is on track for the second-weakest year in 32 for USD credit-equity correlated movement—historic 80% vs. ~74% this year.

Systematic Equity Trading Indicators November 26

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

extreme discount (+4 from Tuesday and +10% higher than the 200-day moving average of all long trade indicators).

• Attractive Short Equity Trade Indicators 9, (+1 from Tuesday and -11% below the 200-day moving average of all model short trade indicators).

  • For G-255 issuers, equity prices of the world's most indebted companies were +.96% Tuesday and +1.59% over the past week, while the S&P 500 rose +.94% Tuesday and 2.26% over the past week.

  • 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), Mastercard Inc (MA),Comcast Corp (CMCSA), Microsoft Corp (MSFT) ,Walt Disney Co/The (DIS) ,Texas Instruments Inc (TXN),AT&T Inc (T), Verizon Communications Inc (VZ) ,Oracle Corp (ORCL), Hewlett Packard Ent (HPE), T-Mobile US Inc (TMUS), Deutsche Telekom AG (DTE GY), Home Depot Inc/The (HD), Philip Morris International Inc (PM)

G-255 issuer news Tuesday

BHP Group (BHP A1/A short credit/long equity) released a statement stating it is "no longer considering a combination of the two companies" after a renewed takeover approach to Anglo American Plc, (AALLN Baa2/BBB short credit/long equity) according to weekend Bloomberg report. Anglo American is in the process of acquiring Teck Resources Ltd. in an all-stock deal.

4

G-255 Specific Credit Sector Indicators November 26

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

  • Valuation Insight: The stochastic credit trading model identifies 284 undervalued bonds ($448.4 billion market

value), with 93 long trade indicators across the 6,000-bond USD universe.

  • At present only Single A rated TMT, BBB rated TMT, BB rated TMT and US Regional Bank sectors have 10+ long individual bond trade indicators.

Short Opportunities

  • 1,502 bonds ($2.3 trillion) are overvalued per the stochastic credit trading model, with 515 short trade indicators.

  • U.S. Big 6 Banks (all ratings):No longer a short indicator as of October 22. Bonds +6 to +20 bp since 9/22.

  • Single A and BB Energy: No longer a short indicator as of October 27. Bonds +6 to +19 bp since 9/27.

  • Single A Healthcare: No longer a short indicator as of October 22. Bonds +5.5 to +17 bp since 9/22.

  • Single A Industrials: No longer a short indicator as of October 22. Bonds +6.5 to +20 bp since 9/22.

  • Autos: 154 bonds ($163.1 billion) are overvalued, with 79 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.

5

G-255 Specific Bond Trading Indicators November 26

  • Closed Positions: The Cigna (Baa1/A-) CI 2.4 03/15/30 (short) and Amazon (A1/AA) AMZN 4.35 03/20/33 (long) both reached their avoid trading levels Wednesday November 19. The Truist Bank (Bank Sub A3/A-) TFC 2 ¼ 3/11/30 short trade indicator reached its avoid trading level on Friday November 21. The General Motors (Baa2/BBB) GM 3.6 06/21/30 short trade indicator reached its avoid trading level on Monday 11/24.

  • Enter New Longs: The trading model added Meta (AA3/ AA-) META 4 7/8 11/15/35 and META 5 1/2 11/15/45 new supply long trade indicators on 11/7. The new Amazon (A1/AA) AMZN 4.35 03/20/33 was added to the Model Trade on Monday 11/17.

  • Enter New Short Trades: The trading model added General Motors (Baa2/BBB) GM 3.6 06/21/30 as a short trade on Monday 11/17. 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 Friday 11/21 and the CVS (Baa3/BBB) CVS 1 3/4 08/21/30 on Monday 11/24

Current Sample Systematic Basket bond trades based on trading strategy November 25

Systematic Trading Indicators Tuesday: None.

6

G-255 Credit Basket Trade Statistics

Tuesday's Basket Trade Long/Short Ratio: 70%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – November 25, 2025)

Performance Summary: Total Trades: 189 (1% of total trade indicators).

  • Long Indicators: 126/145 reached avoid-trading levels, tightening by -9.2 bp.

  • Short Indicators: 36/44 reached avoid-trading levels, widening by +5.85 bp.

  • Remaining Longs: 19 widened by +6.27 bp.

  • Remaining Shorts: 8 tightened by -11.09 bp.

  • Average Spread Movement: ± 6.15 bp in the recommended direction.

  • Success Rate: 86% of indicators reached avoid-trading levels, which is slightly below normal.

  • Average trade holding period: 22.7 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.