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And no, that is not an error: all 5 sectors are adding balance-sheet leverage. The total payout of net income is, yes, 97%.

Finally, the larger question focuses on whether equities of companies that return more capital to shareholders outperform equities of companies that choose to retain capital for investment. In 2025 anyway, the answer is that companies levering up and returning capital to shareholders saw their equity prices outperform those issuers opting to retain capital.

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

Monday's USD risk trading left G-255 equities more attractive and G-255 USD credit more overvalued. US Utilities and USD BB TMT are beginning to become 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 33rd 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: Oracle (Baa2/BBB short credit/ long equity) (-2 to -4bp) Monday

• Top Traded HY G – 255 issuer: Warner Media (WBD Ba2/BB) tighter Monday

Key Trading indicator economic results:

None

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G-255 Credit Market Valuation and New G – 255 Supply December 9

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

• UST 10-Year Rates: Down -5.8 basis points (bp) year-over-year (YoY) and -41.6 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 33 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.

We saw a fourth of the past 8 new G-255 USD bonds come to market as perpetual-rate preferred financial or HY bonds. On Monday, BNP sold a non-call 8-year split-rated (Ba1/BBB-) perpetual that came to market with a 6.87% coupon. The deal came outside the trading model's attractive long indicator.

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, one from October, and one from July hit their model-defined "avoid" levels on Monday. 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, 954 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 9

• Attractive Long Credit Indicators: 71, (-3 from Monday and -35% 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 997, (+60 from Monday and +90% 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 diverged in terms of market valuation with credit spreads tightening and US equity prices lower Monday. The two markets have directionally correlated in 12 of the past 17 trading days.

• US equities are +1.9% 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 9

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

extreme discount (+6 from Monday and roughly the 200-day moving average of all long trade indicators).

• Attractive Short Equity Trade Indicators 6, (+1 from Monday) and -16% 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 Monday:

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 Monday: None

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G -255 Issuer News over the weekend

PepsiCo Inc. (PEP A1/A short credit/long equity) reached an agreement with activist investor Elliott Investment Management that includes a 20% reduction in its US product and several layoffs.

G-255 Specific Credit Sector Indicators December 9

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 162 undervalued bonds ($274 billion market

value), with 71 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

• 1,546 bonds ($2.667 trillion) are overvalued per the stochastic credit trading model, with 997 short trade indicators.

• U.S. Big 6 Banks (all ratings): No longer a short indicator as of 10/22. +6 to +14 bp 9/22 – 10/22

• 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 9

• Closed Positions: The Truist Bank (Bank Sub A3/A-) TFC 2 ¼ 3/11/30 short trade indicator reached its avoid trading level on Monday 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. Florida P&L (Aa2/A+) NEE 5.6 02/15/66 reached its avoid trading level on Friday December 5.

• 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 6

Systematic Trading Indicators Monday: The model again produces a short trade indicators for General Motors (Baa2/BBB) GM 3.6 06/21/30 6

G-255 Credit Basket Trade Statistics

Tuesday's Basket Trade Long/Short Ratio: 71%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – December 8, 2025)

Performance Summary: Total Trades: 191 (1% of total trade indicators).

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

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

• Remaining Longs: 20 tightened by -3.22 bp.

• Remaining Shorts: 8 tightened by -18.64 bp.

• Average Spread Movement: ± 6.76 bp in the indicated direction.

• Success Rate: 86% 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.