Reports Library
Fri, December 19, 2025

Systematic Credit and Equity G-255 Trading Indicators for December 19, 2025

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 211 undervalued bonds ($368.1 billion market

value), with 106 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 – sectors shown with the most recent short trade indicator date for comparison

  • 1,518 bonds ($2.7 trillion) are overvalued per the stochastic credit trading model, with 864 short trade indicators.

  • U.S. Big 6 Banks: 306 bonds ($763 billion) are overvalued with 170 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 ($184 billion) are overvalued with 97 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: 158 bonds ($171.7 billion) are overvalued, with 119 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.

1

G-255 Specific Bond Trading Indicators December 19

Current Sample Systematic Basket bond trades based on trading strategy December 19

Systematic Trading Indicators Thursday: Credit Agricole (A3/A-) ACAFP 4.818 09/25/33 reached its avoid trading level.

2

G-255 Credit Basket Trade Statistics

Friday's Basket Trade Long/Short Ratio: 60%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – December 17, 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 +.63 bp.

  • Remaining Shorts: 9 tightened by -15.19 bp.

  • Average Spread Movement: ± 6.74 bp in the recommended direction.

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

  • Average trade holding period: 23 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.

3

Credit Trading Allocation and Sector Indicators, Thursday Trading December 19

Thursday saw dealers reporting another day of unchanged USD G-255 credit trading but higher G-255 equity prices. US investment grade trading remained focused on large-cap TMT names; notably, Oracle (ORCL Baa2/BBB – short credit/long equity), Meta (META Aa3/AA – long credit/equity), and Broadcom (AVGO A3/A- – long credit and equity) were the primary focal points, driven again by a Bloomberg article highlighting "bombshell" disclosures in Oracle's latest 10-Q regarding future AI data center lease obligations (see page 5). High-yield trading, while tighter on Thursday, was more than 15% below normal volume. US G-255 equities rose primarily following the first US CPI release in over two months.

G-255 Systematic trading short credit indicators fell for the fourth trading day in five and remain below the 1,000 short indicators seen a week ago. USD credit spreads have widened materially, led by TMT.

While G-255 equities remain modestly attractive overall, prior appreciation in 6 single-A TMT and BBB consumer equities (particularly communications) had limited opportunities.

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

  • Top Traded HY G – 255 issuer: Venture Global (B1/BB) -10 bp Thursday

Key Trading Indicator Economic Results Thursday:

  • US Jobless Claims for the week ended December 13 rose by 15k compared to the same week in 2024.

  • The 4-week average for Initial Jobless Claims rose by 10k YoY to 217.5k

November CPI Data

  • Headline CPI (12-month change) +2.7% over the 12 months ending in November.

  • Core CPI (excludes food & energy) +2.6% over the past year.

  • Energy Index +4.2% year-over-year.

  • Food Index +2.6% year-over-year.

  • Monthly CPI (September → November) + 0.2% increase

4

CPI, Reported Earnings and Data Center Impact on the G-255 Equity and Credit Trade Indicators

Several US economic releases and corporate earnings reported on Thursday had a material impact on UST rates and US equity prices. Corporate credit trading volume was materially lower than normal, and the historic directional correlation between G-255 equity and corporate debt issuers was not as strong as it has been over the past 35 years.

CPI Data and Equity Market Reaction:

The quick reaction to Thursday's CPI data followed Wednesday's Micron (MU, not a G-255 issuer) earnings, described as one of the biggest upside surprises ever for a chipmaker.

While the CPI data signaled easing inflation, initial jobless claims and corporate earnings also indicated a weakening US economy. The UST market is now pricing in 100 bp of overnight rate cuts from the Federal Reserve in 2026. This was the first CPI release since the government shutdown, but Thursday's equity trading was described as a "relief bounce" following recent AI-driven volatility in tech stocks.

There were no material G-255 equity or credit trade indicators triggered post-Thursday's results.

Nike (NKE) and FedEx (FDX) Earnings:

Nike (NKE, not a G-255 issuer) revenue beat expectations at $12.4 billion but rose just 1% reported.

  • North America was strong, with revenue up 9%; wholesale up 24%.

  • Wholesale channel rebounded, growing 8%.

  • Greater China was very weak, with revenue down 16% and digital sales down 36%.

  • Gross margin fell sharply, down 300 bps to 40.6%, due to higher product costs and inventory write-downs.

  • Nike Direct declined 8–9%, including a 14% drop in digital and a 3% decline in stores.

  • Converse sales plunged 30% in the quarter.

  • Nike projected a sales decline in the current quarter, and NKE equity traded lower post-results.

FedEx's earnings "beat expectations," but revenue rose just 5% YoY.

  • Significant weakness appeared in its FedEx Freight division (less-than-truckload business).

  • The company lowered its outlook for this segment after reporting revenue down 1.7% year-over-year, tonnage down 2.8%, and shipments down 3.9%.

Top Long/Short Trade Indicator Highlighted This Week

ORCL equity remains a long trade indicator. 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.

Post-Thursday, Oracle is now the top US technology name with a long equity indicator trading materially below its attractive level.

Best Trades

  • Long T-Mobile (TMUS) equity

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

  • Short ORCL protection

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

  • Long ORCL equity

  • Long Broadcom (AVGO) September 22 new supply

  • Best Hedge: US IG CDX; ORCL equity put spread.

Top Long Credit Trading Indicators: Broadcom (AVGO) and Meta (META)

No G-255 long credit issuer is deleveraging faster than AVGO (A3/A- – long credit and equity).

As of September 30, 2025, Meta had more cash than debt.

The Broadcom bonds were sold a week after the most recent cyclical credit spread peak (according to the G-255 Systematic Credit Trading model) occurred on September 22.

The Meta deal was announced October 30, a day after the company reported results and disclosed $30 billion of new lease obligations, which, as noted yesterday, are both assets and liabilities that become expenses against revenue when those data centers are completed. The addition of the operating leases will have no impact on Meta's long-term credit indicator.

We had written over the past 4 weeks that META equity appreciation would lead META credit spreads tighter. META equity has now rallied (+10%) since being ranked the top G-255 long equity trade indicator. This will correlate to tighter META credit spreads.

5

G-255 Credit Market Valuation and New G – 255 Supply December 19

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

  • UST 10-Year Rates: Down -43 basis points (bp) year-over-year (YoY) and -43.1 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 43 bp YoY, while 5-year UST rates are down -75bp 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.

Lipper LSEG data showed short and intermediate investment-grade bonds: $1.28b inflow vs. $2.26b inflow for the week ending December 17. High-yield notes showed: $1.79b inflow vs. $541.8m inflow

  • Treasuries: $294.7m inflow vs. $181.8m inflow

  • US leveraged loans: $1.15b outflow vs. $123.3m outflow

  • Mortgage-related: $257.2m inflow vs. $184.8m inflow

ETF Inflows (Week Ended December 16, 2025)

  • Total net inflows to ETFs reached $9.57 billion (including leveraged funds), up from $7.44 billion the prior week.

  • Broad bond-market ETFs saw inflows increase by $316 million to $4.64 billion.

  • Corporate bond ETFs recorded the largest weekly change, with inflows rising by $2.88 billion to $2.97 billion.

  • Investment-grade ETFs expanded by $2.82 billion to $4.59 billion.

  • High-yield ETFs expanded by $875.4 million to $2.13 billion.

December 2025 G-255 New-Issue Activity (Year-to-Date)

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

G-255 New-Issue Indicator Results

  • On Thursday, Credit Agricole (A3/A-) ACAFP 4.818 09/25/33 reached its avoid trading level.

  • Across all 2025 G-255 new issues, 89% of the indicators that have triggered produced an average return of just under -8 bp over a 34-day holding period.

  • Year-to-date, 966 of 1,082 bonds issued (totaling $1.122 trillion notional) have hit avoid signals.

6

G-255 Credit and Equity Market Indicators December 19

  • Attractive Long Credit Indicators: 106, (+11 from Thursday and -3% below the 200-day moving average of all long indicators).

  • Attractive Long Credit Market Cap accounts for: 51% of all undervalued Systematic credit capital.

  • Attractive Short Credit Indicators 864, (-31 from Thursday and +67% above the 200-day moving average of all model short trade indicators).

  • Attractive Short Credit Market Cap accounts for: 57% 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 directionally with credit spreads unchanged to slightly tighter and US equity prices higher Thursday. The two markets have directionally correlated in 18 of the past 24 trading days.

  • US equities are +3.25% over the past month; US credit spreads are unchanged 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 19

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

extreme discount (-3 from Thursday and -6% below the 200-day moving average of all long-trade

indicators).

• Short Equity Trade Indicators +7, (unchanged from Thursday) and -24% 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) ATT (T) Oracle Corp (ORCL) T-Mobile US Inc (TMUS) Macquarie Group (MQG AU) Southern Co/The (SO)

SoftBank Group Corp Occidental Petroleum (OXY) Crown Castle (CCI)

  • Equities leaving highest ranked long indicators on Thursday: Unilever (UNA NA)

G -255 Issuer News Thursday

BBVA SA (BBVA Baa1/A- long credit/equity) will carry out its largest share buyback ever, seeking to draw a line under its failed bid for Banco Sabadell SA. BBVA received authorization from the European Central Bank for a buyback program of up to €3.96 billion that will be executed in stages and run for about 12 months. BBVA has stated it will return most of the €49 billion in capital it aims to generate in the four years through 2028 to shareholders.

7

G-255 Credit and Sector Indicators for "Long Only" trading strategies December 19

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.