Thursday's trading session showed average volume, which—given the date—was most impressive. While USD credit spreads closed slightly tighter on the day, trading was clearly "more sellers than buyers." We saw increased pressure on Oracle credit (Baa2: short credit / long equity) following its earnings results. Additional angst emerged this evening after Broadcom (AVGO A3/A-: long credit/equity) reported. As expected, the market reaction to a third -25 bp rate cut remained muted.

Weekly jobless claims, which strongly correlate with the monthly employment report, were materially stronger YoY for the weeks ended December 6 (initial claims) and November 29 (continuing claims).

We will get a clearer picture of where the US economy stands when Federal Express (Baa1/BBB+: short credit/equity) reports next week. November non-farm payrolls and CPI data are also due next week.

Oracle Earnings/Broadcom Earnings

For a second consecutive day, one of the "less-than--tech" issuers posted results that failed to meet analyst expectations. Last night's Broadcom and Wednesday night's Oracle earnings trailed consensus, and both stocks traded down ~5% in the aftermarket. That said, overall revenue and earnings growth at Oracle and Broadcom continues to accelerate.

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

We like to call it the communications / "low-tech" sector. Prior to October, Broadcom itself was rated Baa1/BBB+. Unlike Oracle, however, Broadcom's balance sheet is shedding debt rapidly, and our stochastic trading model continues to favor owning the recent new-issue bonds. AVGO equity, even after last night's move, remains above its G-255 attractive long trading indicator level. Among single-A rated TMT issuers, only 6 of 18 stocks currently trade below their G-255 systematic attractive trading levels.

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G – 255 Single A TMT Sector Balance Sheet

Unlike all other 44 trading sectors, YoY returns to shareholders in single-A TMT are growing slower than annual revenue and profit growth. Additionally, the sector's balance sheet is de-levering slightly.

Which implies?

Further increases in capital returns to shareholders in this sector. Meta (META) and Comcast (CMCSA) are currently the only two single-A TMT equities trading with an equity long value indicator above 109. Sector attractiveness is waning quickly as several names have rallied over the past three weeks.

G – 255 Systematic Credit Model Trading Allocation Shift

The model had held the same allocation for seven weeks. Today marked a second consecutive day of shift (more short) in the systematic credit allocation indicator, triggered by weak fund-flow data and materially higher short-trade signals.

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

We saw a small inflow into corporate bond mutual funds in the week ending December 11, following outflows in both High Yield and Investment Grade corporate bond ETFs for the week ended December 9. With G-255 credit now showing over 1,000 short indicators, representing 66% of the entire overvalued G-255 credit market value, the systematic model's trade allocation shifted from 45% long to 42.5% long and from 35% short to 37.5% short. This is the second allocation change in as many days. G-255 equities remain attractive overall, with communications and "low-tech" issuers the most compelling. US Utilities and USD BB TMT are also attractive G-255 long-equity sectors. Credit, however, continues to look overvalued per the G-255 stochastic trading model.

• Top traded IG G – 255 issuer: Oracle (Baa2/BBB short credit/ long equity) +5bp Thursday

• Top Traded HY G – 255 issuer: Asurion (ASUCOR Ba3/BB-) tighter Thursday

Key Trading indicator economic results:

• Initial US jobless claims for the week ending December 5, were 236k -3k from the same week in 2024.

• The 4-week average for initial claims was 216.75k - 7.25k from the same week a year ago.

• Continuing claims for the week ended Nov 28 fell -35k YoY and are at a 33-week low.

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G-255 Credit Market Valuation and New G – 255 Supply December 12

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

• UST 10-Year Rates: Down -16.9 basis points (bp) year-over-year (YoY) and -41 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 -45 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.

US Fund Flows – Week Ended December 10 (vs. prior week), per LSEG Lipper

• Short & Intermediate Investment-Grade bonds: +$1.65 bn inflow (vs. +$1.6 bn)

• High-Yield notes: +$541.8 mm inflow (vs. +$1.19 bn)

• Treasuries: +$181.8 mm inflow (vs. -$3.06 bn outflow)

• US Leveraged Loans: -$123.3 mm outflow (vs. -$182.5 mm)

• Mortgage-related: +$184.8 mm inflow (vs. +$86 mm)

No new G-255 USD corporate bond issuance on Thursday

December 2025 G-255 New-Issue Activity (YTD)

During December, 8 G-255 issuers have sold 19 bonds totaling $21.2 billion, led by single-A-rated pharma issuer Merck (Aa3/A+), which priced an $8 billion 8-part transaction.

Bond ETF Flows – Week Ended December 9 (week-over-week change)

• Broad bond-market ETFs: +$1.01 bn → cumulative $4.32 bn

• Corporate bond ETFs swung -$2.07 bn → outflows of -$247.8 m

• Investment-Grade corporate ETFs: +$73.1 mm → cumulative $1.4 bn

• High-Yield corporate ETFs: -$427.5 mm → cumulative $1.17 bn

Dedicated corporate bond ETF detail:

Dedicated IG corporate bond ETFs: -$989 mm outflow (vs. +$509 mm inflow prior week)

Dedicated HY corporate ETFs: -$711 mm outflow (vs. -$285 mm prior week)

G-255 New-Issue indicator results

On Thursday, one additional November 2025 new issue, three October issues, one August issue, and one July issue reached their model-defined "avoid" levels.

Across all 2025 G-255 new issues, 89% of the indicators that have triggered have produced an average return of just under -8 bp over a 34-day holding period. Year-to-date, 965 of 1,082 bonds issued ($1.122 trillion notional) have hit avoid signals.US fund flows for the week ended Dec. 10, compared to a week earlier, according to LSEG Lipper.

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G-255 Credit and Equity Market Indicators December 12

• Attractive Long Credit Indicators: 72, (-9 from Thursday and -25% 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 1047, (+57 from Thursday and +104% above the 200-day moving average of all model short trade indicators).

• Attractive Short Credit Market Cap accounts for: 66% 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 Thursday. The two markets have directionally correlated in 15 of the past 20 trading days.

• US equities are +1% over the past month; US credit spreads are now tighter 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 December 12

• Attractive Long G-255 Equity Trade Indicators: 62 (includes both undervalued and equities priced at

extreme discount (-4 from Thursday and -9% below the 200-day moving average of all long-trade

indicators).

• Attractive Short Equity Trade Indicators 10, (unchanged from Thursday) 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 Thursday:

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

Oracle Corp (ORCL) T-Mobile US Inc (TMUS) 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 Thursday: Home Depot (HD) and Carnival Cruise (CCL)

G -255 Issuer News Thursday

Walt Disney Co. (A1/A long credit/equity) is licensing iconic characters to OpenAI for use on its artificial intelligence video platform and has agreed to take a $1 billion stake in the startup.

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G-255 Specific Credit Sector Indicators December 12

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 are the only sectors with 10 or more long trade indicators.

Short Opportunities

• 1,556 bonds ($2.672 trillion) are overvalued per the stochastic credit trading model, with 1047 short trade indicators.

• U.S. Big 6 Banks: 310 bonds ($777 billion) are overvalued with 230 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: 126 bonds ($182 billion) are overvalued with 98 short trade indicators.

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

• Autos: 168 bonds ($180 billion) are overvalued, with 130 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 12

• 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 12

Systematic Trading Indicators Thursday: None

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G-255 Credit Basket Trade Statistics

Wednesday's Basket Trade Long/Short Ratio: 64%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – December 11, 2025)

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

• Long Indicators: 131/147 reached avoid-trading levels, tightening by -9.22 bp.

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

• Remaining Longs: 16 tightened by -2.04 bp.

• Remaining Shorts: 9 tightened by -17.11 bp.

• Average Spread Movement: ± 6.75 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.