Long Opportunities: - Sectors are shown with the most recent long trade indicator date for comparison

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 228 undervalued bonds ($410.4 billion market

value), with 108 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 – sectors shown with the most recent short trade indicator date for comparison

• 1,513 bonds ($2.73 trillion) are overvalued per the stochastic credit trading model, with 872 short trade indicators.

• U.S. Big 6 Banks: 303 bonds ($755 billion) are overvalued with 169 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: 125 bonds ($180 billion) are overvalued with 90 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: 167 bonds ($176 billion) are overvalued, with 121 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; avoid 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 62.5% long position threshold is reached.

• Current Status: Add new supply trades where the issuer is deleveraging; add new issue bonds where spreads have widened by +3 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 62.5% long hurdle, initiate short positions in releveraging issuers (avoiding 5-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 17

• Closed Positions: 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 17

Systematic Trading Indicators Tuesday: None

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G-255 Credit Basket Trade Statistics

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

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – December 16, 2025)

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

• Long Indicators: 132/147 reached avoid-trading levels, tightening by -9.23 bp.

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

• Remaining Longs: 15 widened by +1.32 bp.

• Remaining Shorts: 9 tightened by -15.17 bp.

• Average Spread Movement: ± 6.62 bp in the recommended direction.

• Success Rate: 87.5% of indicators reached avoid-trading levels, which is slightly below normal.

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

G-255 Trade Sizes and Systematic Trade Process

The G-255 Equity and Credit Indicators for the World's Largest Issuers of Corporate Bonds

• G-255 represents the world's 255 largest issuers of corporate securities and have a minimum equivalent of $15 billion of tradable liquid debt market capital in all global currencies.

• At present there are just under 6,000 G-255 USD bonds in circulation.

• The average capitalization of each G-255 bond is just over $1.2 billion (including floating rate notes).

• There are 242 publicly listed equities for the G-255 debt issuers that trade in 8 currencies.

• The total equity market capital of the 242 stocks is just over $44 trillion or $182 billion per issuer. That is 60% larger equity capital per constituent than the S&P 500.

• 80 of the 242 publicly traded equities for the G-255 are domiciled outside of the United States.

G-255 Credit Indicator USD Trading Liquidity

• The Systematic G-255 trading system is designed to trade with no human input. Each fixed coupon USD trading indicator requires $750mm of outstanding market capital and $250mm of total trading volume in the prior 30 trading days if not a new issue.

• Each G-255 floating rate note USD trading indicator requires $300mm of outstanding market capital and $50mm of total trading volume in the prior 30 trading days if not a new issue.

• Each G-255 underlying equity is listed on the issuer's national equity trading exchange.

G-255 Credit Indicators USD Trading Process and Size – Overall Strategy Is Designed for $3 Trillion of Assets

• The G – 255 equities and bonds are the most liquid cash securities in their local markets. The USD bond and equity indicators are "systematic" and employ only publicly available issuer disclosure and market trade prints on TRACE or any of the US trading exchanges.

• The G- 255 trading process is designed for "systematic" trading on electronic platforms for both equities and bonds.

• The trading system is designed to handle the largest institutional trade sizes as a result. The ability to trade size is dependent on user resources and trading relationships as all of the USD corporate bonds in the G-255 systematic trading model are traded OTC by over 80 dealers and all 5 major US electronic bond trading firms.

G-255 Credit Indicators and USD Liquidity - 80% of All Daily TRACE Trades

The G-255 Credit trading indicators cover 80% (95% of all USD investment grade and 48% of all USD non-investment grade trades) posted daily on NASD TRACE.

G-255 Trade Indicators are created daily for all 6,000 securities.

• Indicator calibration: The stochastic credit trading model employs earnings data to recalibrate balance sheet leverage and valuation indicators, and then compares spread-to-curve, earnings momentum, and debt ratios relative to the issuer's trading history.

• Bond-level granularity: G-255 USD issuers average 27 USD bonds outstanding ($27.5 billion of USD debt cap per issuer). The systematic model assesses historical relative value across the capital structure and creates indicators for overvalued or undervalued bonds.

• Equity-credit linkage: For dual-listed (equity and corporate bond) issuers, equity signals (cashflow comparisons and returns to shareholders influence credit spreads). G-255 disclosures synchronize these inputs and produce long and short trading indicator levels for each security that meets the model's liquidity minimum.

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Credit Trading Allocation and Sector Indicators, Tuesday Trading December 17

Tuesday saw dealers reporting unchanged USD G-255 credit trading but lower G-255 equity prices. US investment grade trading remained focused on large-cap TMT and bank names, notably Oracle (ORCL Baa2/BBB – short credit/long equity) and Broadcom (AVGO A3/A- – long credit and equity). In high yield, Pemex (PEMEX B1/BBB- – long credit) and CoreWeave (CRWV B1/B) were the primary focal points, driven by a Bloomberg article highlighting "bombshell" disclosures in Oracle's latest 10-Q regarding future AI data center lease obligations (see page 5).

Since the G-255 Systematic trading model generated 1,000 short indicators last Thursday — representing 66% of the total overvalued G-255 credit market value — USD credit spreads have widened materially. Big 6 bank bonds have led the risk-off move in end-of-year trading, with G-255 short indicators declining by 55 over the past three trading days.

While G-255 equities remain modestly attractive overall, appreciation in 6 single-A TMT and BBB consumer equities (particularly communications) has reduced the number of attractive equity opportunities by 11 week-over-week to 54.

Credit Trading Allocation Indicators:

• Top traded IG G – 255 issuer: Oracle (Baa2/BBB short credit/ long equity) +6bp Tuesday

• Top Traded HY G – 255 issuer: PEMEX (B1/BBB-) +8bp Tuesday

Key Trading indicator economic results Tuesday:

• Nonfarm payrolls increased by 64,000 in November (following a 105,000 decline in October), driven primarily by gains in health care, social assistance, and construction.

• November unemployment rate rose to 4.6% from 4.5%

• November average hourly earnings +0.1% MoM

• Hourly earnings YoY +3.5%

• US same-store sales rose 6.2% YoY in the week ended December 13 (Johnson Redbook)

• Month-to-date sales through December 13: +5.9% YoY

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Meta, Oracle, and Broadcom G-255 Credit Trade Indicators

Meta Lease Obligations Revisited (From ~6 Weeks Ago)

Approximately six weeks ago, we addressed erroneous claims that Meta (META Aa3/AA – long credit/equity) was accelerating financial leverage through its capex and leasing strategy for AI-driven data centers and cloud processing needs across existing and new applications.

Market commentary at the time suggested that roughly $60 billion in future lease obligations would meaningfully increase leverage on Meta's balance sheet.

As we emphasized then, quantitatively, these operating lease obligations do not materially leverage Meta's balance sheet. Meta operates an online business with personal communication and applications serving over 4 billion highly loyal global users. Neither the $30 billion in new-issue bonds sold on October 30 nor Meta equity has fully recovered from the sell-off triggered by that commentary. Nonetheless, Meta remains the second most attractive long G-255 issuer in both equity and corporate debt within the systematic trading universe.

Oracle Update: No Longer a Short Credit Trade

Oracle bonds have widened by as much as +60 bp since the G-255 systematic model's short trade indicator flipped off in June 2025. Currently, ORCL has zero short trade bond indicators.

While Oracle is releveraging its balance sheet, this is not unprecedented, the company has previously managed net debt loads exceeding $80 billion. The ORCL capital structure is now trading at its 52-week widest levels.

Is the ORCL capital structure a long trade indicator at current levels? A: No.

However, ORCL equity remains attractive. As equity prices rise, the credit structure has an 87.5% probability of tightening (initially in the 5-year tenor) over the next 66 trading days. Model indicators show no increase in credit risk today compared to two years ago.

Yesterday's Oracle 10-Q disclosed $248 billion in lease-payment commitments, with "substantially all" tied to data centers and cloud capacity, commencing between now and June 2028—approximately $150 billion more than disclosed in September's earnings footnotes. Credit Sights analysts Jordan Chalfin and Michael Pugh described the disclosure as a "bombshell." The obligations span roughly 18 years, equating to about $14 billion annually.

Quantitatively, operating leases are recognized as assets on the balance sheet, and payments are typically tied to revenue generation. Early termination penalties (if ever needed) are far less punitive than the costs of owning and building data centers outright.

Oracle does face significant capex for equipment and cloud computing buildouts. FY2026 revenue is projected near $70 billion, growing 14–17% annually, with acceleration expected over the next five years.

From an accounting perspective, Oracle differs from peers like Alphabet (GOOGL Aa2/AA+ – long credit/equity),

Microsoft (MSFT Aaa/AAA – long credit/equity), Amazon (AMZN Aa3/AA- – long credit/equity), and Meta due to less owned real estate and higher initial financial leverage.

Oracle credit spreads will continue to correlate closely with equity price movements. Cloud & Software/Services revenue, overall revenue, earnings, and operating cash flow (growing faster than revenue) all remain in acceleration.

The G-255 credit-equity model currently ranks Meta as the most attractive technology-sector long equity in the G-255 universe. Oracle is the only other US technology name with a long equity indicator trading materially below its attractive level.

Best Trades

• Long Meta equity

• Long Meta October 30 new supply (front-end bonds expected to outperform initially per the G-255 model)

• Short ORCL CDS

• Long ORCL 4.45% 09/26/30 (+135 vs. 5Yr UST)

• Long ORCL equity

Best hedge: US IG CDX; ORCL equity put spread (specific strikes not detailed here).

Is Broadcom (AVGO) the top G-255 long trade credit indicator? A: Yes.

No G-255 long credit issuer is deleveraging faster than AVGO (A3/A- – long credit and equity). Earnings and sales growth continue to accelerate, despite the company occasionally missing quarterly earnings expectations.

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G-255 Credit Market Valuation and New G – 255 Supply December 17

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

• UST 10-Year Rates: Down -23.2 basis points (bp) year-over-year (YoY) and -40.2 bp year-to-date (YTD). US Credit Spreads reached their tightest point of the year on Tuesday, 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 -22 bp YoY, while 5-year UST rates are down -55bp 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 USD corporate bond issuance on Tuesday

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.

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.

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G-255 Credit and Equity Market Indicators December 17

• Attractive Long Credit Indicators: 108, (+14 from Tuesday and 12% above the 200-day moving average of all long indicators).

• Attractive Long Credit Market Cap accounts for: 45% of all undervalued Systematic credit capital.

• Attractive Short Credit Indicators 872, (-60 from Tuesday and +69% above the 200-day moving average of all model short trade indicators).

• Attractive Short Credit Market Cap accounts for: 54% 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 wider and US equity prices lower Tuesday. The two markets have directionally correlated in 17 of the past 23 trading days.

• US equities are +1.5% over the past month; US credit spreads are again 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 December 17

• Attractive Long G-255 Equity Trade Indicators: 59 (includes both undervalued and equities priced at

extreme discount (+5 from Tuesday and -6% below the 200-day moving average of all long-trade

indicators).

• Attractive Short Equity Trade Indicators 6, (-2 from Tuesday) and -30% 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) ATT (T) Oracle Corp (ORCL) T-Mobile US Inc (TMUS) Royal Caribbean (RCL) Macquarie Group (MQG AU)

Southern Co/The (SO) Unilever PLC (UNA NA) Kroger (KR)

SoftBank Group Corp Occidental Petroleum (OXY)

• Equities leaving highest ranked long indicators on Tuesday: Comcast (CMCSA)

G -255 Issuer News Tuesday

Ford (F Ba1/BBB- short credit/equity) Moody's Ratings has affirmed the ratings of Ford Motor Credit Company LLC (Ford Credit) and Ford Credit Canada Company (Ford Credit Canada), including the issuers' Ba1 long-term senior unsecured ratings and Not Prime commercial paper ratings.

Pfizer (PFE A2/A long credit/equity) forecast little growth in sales for f 2026 and as the company looks for acquisitions. Revenue next year will be $59.5 billion to $62.5 billion. Sales this year are expected at $62 billion, within the range the company projected in early November.

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G-255 Credit and Sector Indicators for "Long Only" trading strategies December 17

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.