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Wed, January 7, 2026

Systematic Credit and Equity G-255 Trading Indicators for January 7, 2026

G-255 Specific Credit Sector Indicators January 7 – Long Only Indicators on Page 8

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 182 undervalued bonds ($331 billion market

value), with 112 long trade indicators across the 6,000-bond USD universe.

  • At present Single A and BBB 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.

  • 1,542 bonds ($2.68 trillion) are overvalued per the stochastic credit trading model, with 1122 short trade indicators.

  • U.S. Big 6 Banks: 292 bonds ($718.9 billion) are overvalued with 235 short trade indicators.

  • BBB Energy: 81 bonds ($96 billion) are overvalued with 59 short trade indicators.

  • Single A Healthcare: 122 bonds ($175.8 billion) are overvalued with 107 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: 164 bonds ($172.2 billion) are overvalued, with 147 short trade indicators

Systematic Portfolio Daily Trading Model Indicators

  • Long Indicators: Target deleveraging new issues with attractive valuations, focusing on 7-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 +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 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 January 7

  • Closed Positions: 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. Credit Agricole (A3/A-) ACAFP 4.818 09/25/33 reached its avoid trading level Thursday December 18. McDonald's (Baa1/BBB+) MCD 4.4 02/12/31 reached its avoid trading level Friday December 19. Lowe's (Baa1/BBB+) LOW 4 1/2 10/15/32 and RBC (Baa2/BBB) RY 6 1/2 11/24/2085 reached their avoid trading level Monday December 22. Lowe's (Baa2/BBB+) LOW 4 1/2 10/15/32 reached its avoid trading level on Friday January 2.

  • Enter New Longs: On Wednesday December 3, Celanese (Ba2/BB+) CE 7 02/15/31 was added as a new issue long indicator. ATT (Baa2/BBB) T 4.9 11/01/35 Friday 12/19/25, RBC (A1/A) RY 4.305 11/03/31 and Amazon (A1/AA) AMZN 5.55 11/20/65 Monday 12/22/25 were added as a G – 255 de-levering new issue trading more than +2bp to NIP.

  • 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 January 7

Systematic Trading Indicators Tuesday: None All but two (Toronto-Dominion Bank and Canadian Imperial Bank of Commerce) of the 25 G-255 issuers of corporate credit scheduled as of January 6–7 will report earnings within the next 40 days. The trading model avoids adding credit risk to issuers reporting within the next 30 days.

Given the elevated number of G-255 short trade indicators on Tuesday evening (1,122), the Systematic Trading model avoids all new supply.

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Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – January 7, 2026)

Performance Summary

  • Total Trades: 195 (2025 full year); 25 in 2026

  • Long Indicators (2025): 136 out of 150 tightened by an average of -9.2 bp. In 2026 1 of 14 tightened by (-5bp).

  • Short Indicators (2025): 36 out of 45 widened by an average of +5.85 bp.

  • Remaining Longs (2025): 14 positions tightened by -1.53 bp.

  • Remaining Shorts (2025): 9 positions tightened by -19.23 bp.

  • Average Spread Movement (2025): ±6.73 bp in the recommended direction.

  • Success Rate (2025): 88.2% of indicators reached avoid-trading levels (slightly below historical norms).

  • Average Trade Holding Period (2025): 23.4 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 $1.16 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 $47 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 To Trade $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 uses earnings data to recalibrate balance sheet leverage and valuation indicators. It then evaluates spread-to-curve positioning, earnings momentum, and debt ratios against each issuer's historical trading patterns.

  • Bond-level granularity: G-255 USD issuers hold an average of 27 USD bonds outstanding (equivalent to a $27.5 billion USD debt cap per issuer). The systematic model analyzes historical relative value across the capital structure, generating indicators for overvalued or undervalued bonds.

  • Equity-credit linkage: For issuers with both publicly traded equity and corporate bonds, equity signals—driven by cash flow comparisons and shareholder returns—directly influence credit spreads. The G-255 framework integrates these inputs to produce synchronized long and short trading signals for each qualifying security, based on the model's liquidity thresholds.

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Credit Trading Allocation and Sector Indicators

Tuesday, January 7, 2026, A second consecutive day of strong G-255 equity pricing, accompanied by increased trading volumes in both G-255 investment-grade and high-yield credit.

An additional 12 G-255 issuers (all but two non-U.S.) brought new bonds to market. 2026 is forecasted to be a record year for large-cap debt issuance, driven by over $500 billion in maturing debt and an estimated $1 trillion in borrowing needs to fund dividend increases and share repurchases.

The G-255 systematic credit trading model recorded 1,122 short trade indicators, maintaining the elevated level that triggers avoidance of all new supply until overall credit spreads widen by at least +5 bp.

G-255 equities remain only modestly overvalued, with 48 names still generating undervalued or long trade indicators overnight.

Despite 25 G-255 issuers pricing 72 bonds totaling $64.45 billion, there was minimal discernible impact on overall equity valuations. Credit valuations, however, tightened sufficiently on Tuesday to push G-255 USD credit into significant overvaluation territory.

Over the past two years, only 15 trading days have registered 1,100 or more G-255 credit short trade indicators. In every prior instance, the threshold has preceded a pullback of at least +11 bp in overall G-255 credit spreads.

Credit Trading Allocation Indicators:

Top Traded Issuers:

  • Top traded IG G-255 issuer: Oracle (Baa2/BBB short credit/long equity) -3bp tighter Tuesday.

  • Top traded HY G-255 issuer: Pemex (Ba1/BBB) -2bp Tuesday.

Key Trading Indicator Economic Results – Tuesday:

  • Sales at stores open at least a year, or same-store sales, rose 7.1% in the Jan. 3 week compared to a year earlier, Johnson Redbook says. Month-to-date sales through Jan. 3 rose 6.8%.

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G-255 Systematic Model Update: Monday New Supply Review

January 7, 2026, Earnings Outlook

  • Eighty-eight G-255 issuers are scheduled to report earnings over the next 30 days.

  • G-255 credit trade indicators currently signal no additional risk in credit positions (neither new longs nor shorts) among issuers reporting within the next 30 days. However, the G-255 trading model now avoids new issue

  • G-255 equity trade indicators are not explicitly timed to earnings dates but do incorporate information from released earnings reports.

  • 143 of 255 (56%) of the largest issuers of global debt are re-levering going into earnings season. This is the highest percentage of issuers expanding their balance sheets in the 33-year history of the systematic trading model.

  • 29 of 242 (12%) underlying G-255 equity issuers have experienced operating cash flow declines in the current financial year, based on their most recent reported results.

  • On Monday, 13 G-255 issuers sold $32 billion of USD bonds—all of which will report results in less than 40 days. According to the trading model, only 27 of 37 (73%) of the bonds issued on Monday were priced attractively. However, 33 of the 37 bonds traded at tighter spreads into Tuesday's close.

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G-255 Credit Market Valuation and New G – 255 Supply January 7

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

  • UST 10-Year Rates: are unchanged year-to-date (YTD). US Credit Spreads reached their tightest point of the year on Wednesday, February 21, 2025, and widest on Thursday, April 10, 2025.

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

Another 12 G-255 issuers priced 25 new bonds totaling $32.4 billion. 20 (80%) of the new bonds had long trade

Indicators. The new January G – 255 supply ($64.45 billion) has been easily absorbed by the USD credit market owing

to just $18 billion of December new issue and over $50 billion of G -255 bond calls and maturities.

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G-255 Credit and Equity Market Indicators January 7

  • Attractive Long Credit Indicators: 112, (-25 from and +11% above the 200-day moving average of all long indicators).

  • Attractive Long Credit Market Cap accounts for: 59% of all undervalued Systematic credit capital.

  • Attractive Short Credit Indicators 1122, (+59 from Tuesday and +101% above the 200-day moving average of all model short trade indicators).

  • Attractive Short Credit Market Cap accounts for: 74% of all overvalued Systematic credit capital.

G-255 Equity Trade Indicators and US Equity Correlation to Overall US Credit Spreads

US equities are +1% over the past month; US credit spreads are unchanged MoM.

  • 2025 was the second-weakest year in 32 for USD credit-equity correlated movement—historic 80% vs. ~75% last year.

Systematic Equity Trading Indicators January 7

• Attractive Long G-255 Equity Trade Indicators: 48 (includes both undervalued and equities priced at extreme discount (-4 from Tuesday and -22% below the 200-day moving average of all long-trade indicators).

• Short Equity Trade Indicators -9, (+1 from Tuesday) and -12% to the 200-day moving

average of all model short trade indicators).

Equities with highest ranked Long and Short Indicators

WBC (Westpac Bank Australia) is no longer a highest ranking short equity trade indicator.

G -255 Issuer News Tuesday

None

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G-255 Credit and Sector Indicators for "Long Only" trading strategies January 7

*Represents change from prior day indicators

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.