Systematic Credit and Equity G-255 Trading Indicators for January 12, 2026
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G-255 Specific Credit Sector Indicators January 12 – 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 213 undervalued bonds ($378 billion market
value), with 127 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.
1,565 bonds ($2.744 trillion) are overvalued per the stochastic credit trading model, with 1145 short trade indicators.
U.S. Big 6 Banks: 295 bonds ($720.7 billion) are overvalued with 229 short trade indicators.
BBB Energy: 85 bonds ($102 billion) are overvalued with 62 short trade indicators.
Single A Healthcare: 123 bonds ($179.6 billion) are overvalued with 102 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 billion) are overvalued, with 156 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 12
ACAFP, AMZN, ATT, BPLN, CE, COF, CVS, GM, LLOYDS, LOW, MCD, RY, T, TOYOTA
Current Sample Systematic Basket bond trades based on trading strategy January 9
Systematic Trading Indicators Friday: None
Monday's basket trade position indicator: 57% long
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Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – January 9, 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 2 of 14 tightened by (-7bp).
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. (2026): 12 positions widened by +.43 bp
Remaining Shorts (2025): 9 positions tightened by -19.23 bp.(2026): 9 positions widened by + .42 bp
Average Spread Movement (2025): ±6.73 bp in the recommended direction. (2026) ±.55 bp
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
Friday, January 9, 2026, G-255 equities trailed the S&P 500 owing to the technology weighting of that index (24.4% vs 19.2% for the G – 255) and 80 non-US constituents among the 242 issuers. G-255 bonds' credit spreads tightened by -1 bp, despite strong gains in all equity markets.
The two year moving average of G – 255 credit short trade indicators reached 530 for the first time since November 2024. Over 55% of the G – 255 issuers are adding debt. Longer dated G - 255 credit trade indicators are now at extremes as well.
Top Traded Issuers:
Top traded IG G-255 issuer: Oracle (Baa2/BBB short credit/long equity) +2bp wider Friday.
Top traded HY G-255 issuer: Pemex (B1/BBB) -2bp tighter Friday.
Key Trading Indicator Economic Results – Friday:
US non – farm payrolls rose by +50,000 in December compared to 64,000 in November.
US unemployment rate fell to 4.4% in December from 4.5% in November.
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G-255 Systematic Model Update: Monday New Supply Review
January 09, 2026, Trading performance and Earnings Outlook
Equity Performance
G-255 equities rallied again on Friday despite a myriad of poor economic data on Thursday and Friday.
Economic Data Thursday and Friday
Friday's December Non – Farm Payrolls (50k) were the third lowest in the post covid trading era. • Companies announced 71,321 job cuts in November, -48% from October and +24% YoY.
Hiring intentions are down 35% this year compared to the same point in 2024, with year-to-date hiring plans being the lowest since 2010.
US Initial Jobless Claims for the week ended January 2, 2026, were 208K (+9K from the same week in 2025).
Continuing Claims for the week ended December 26, 2025, were 1.914mm (+70K from the same week in 2025).
New York Fed 1-year Inflation Expectations rose to 3.4% in December from 3.2% in November.
The December Average perceived probability of missing debt payment over next 3 months rose 1.6% to 15.3%, highest since April 2020.
Friday's December Non-Farm Payrolls (50k) were the third lowest in the post-COVID trading era.
US equities and USD credit no longer trade based on earnings or economic data
• USD equities currently trade @ 32x earnings. This is a USD record.
Market pundits want to tell us that S&P earnings are now growing twice as quickly as they did 10 years ago. Except that's not true.
Take out adjustments and take out the change in constituents (companies that went into the S&P 500 and the companies that came out). Only 297 of the 500 companies in the S&P 500 at the beginning of 2016 are still in the index.
Include the QoQ S&P earnings in 2019–2021 (highly negative) and S&P 500 company reported earnings growth is roughly 9% vs. 6.5% 10 years ago.
• US Investment grade credit spreads are roughly 105bp as of this morning. They were just under +161 in January 2016.
How many G-255 were adding leverage to their balance sheets in January 2016? A: 101 or 40% fewer than today.
What drives equity and credit returns today? A: The correlation between equity price movement and credit.
As Big 6 banks are set to kick off earnings season tomorrow,
5 of the big 6 banks are adding significant net debt to their respective balance sheets
5 of the big 6 banks are adding significant net debt to their respective balance sheets.
Big 6 bank revenue growth is 6%
Big 6 bank earnings growth is 9%
Big 6 bank share repurchases + dividends are +26%
Big 6 bank equity returns in 2025 = 39%
Big 6 bank 10Y credit spreads (-17.2bp)
Given the historical correlation between U.S. equity prices and 5–10-year credit spreads, as well as the current valuation of U.S. bank equities, next week's major U.S. bank earnings reports are highly likely to influence G-255 credit valuations and potentially trigger additional new bond supply post-results.
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G-255 Credit Market Valuation and New G – 255 Supply January 12
On a Risk/Reward basis, High Yield bonds have far outperformed Investment Grade in 2025
YOY change in the UST 10Y -58.3bp US Credit Spreads reached their tightest point of the year on Friday, February 21, 2025, and widest on Monday, April 10, 2025.
• YOY change in the UST 5Y: -83 bp
• YOY change in the UST 10Y: -58.3 bp
Bloomberg 10Y credit spreads are derived by taking the Moody's index yield and subtracting the UST 10Y YTM.
No new G-255 issue priced Friday, as 33 of the world's largest corporate borrowers came to market last week.
Year-to-date January G-255 supply now stands at approximately $77.4 billion (90 bonds). This elevated issuance has been readily absorbed by the USD credit market, supported by light December issuance (~$18 billion) and over $50 billion in G-255 bond calls and maturities.
Of the 90 G-255 bonds issued last week, 70 are tighter in credit spread on average of -2.1 bp; 9 have reached their avoid trading level (8 had attractive trade indicators less -5 bp from NIP).
G-255 New-Issue Indicator Results
• Across all 2025 G-255 new issues, 92% of avoid trade indicators delivered an average return of just under -8 basis points over a 34-day holding period.
• Over the past 12 months, 1,007 of 1,100 G-255 USD bonds issued (totaling $1.147 trillion in notional) have hit avoid signals.
Why Sell G-255 New-Issue USD Bonds at Avoid Levels? With 39% of all G-255 new-issue USD bonds now trading outside the model's avoid trading levels, these positions offer attractive returns over shorter holding periods.
• An average -8 basis points over 44 trading days equates to -48 basis points of annualized spread tightening—representing top-quartile performance, with no negative trading months and very high Sharpe ratios. • The selection universe totals $1.2 trillion.
Fixed Income Flows (Week Ended January 7, 2026 – LSEG Lipper)
• Short and intermediate investment-grade bonds: $4.31 billion inflow vs. $1 billion inflow – This marks the largest inflow since the week ending November 20, 2024.
• High-yield notes: $277.7 million inflow vs. $69.9 million outflow
Fixed Income ETF Flows (Week Ended January 6, 2026) Investments in U.S.-listed fixed income ETFs saw a 21% week-over-week decline in net inflows—the 39th consecutive week of positive inflows overall.
• Total net inflows: $7.68 billion (including leveraged funds), down from $9.72 billion the prior week
• Corporate bond ETFs: Minor outflow of -$86 million (vs. +$298 million inflow prior week)
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G-255 Credit and Equity Market Indicators January 12
Attractive Long Credit Indicators: 128 (-12 from Friday and +27% above the 200-day moving average of all long indicators).
Attractive Long Credit Market Cap accounts for: 60% of all undervalued Systematic credit capital.
Attractive Short Credit Indicators 1069, (+71 from Friday and +105% above the 200-day moving average of all model short trade indicators).
Attractive Short Credit Market Cap accounts for: 73% of all overvalued Systematic credit capital.
G-255 Equity Trade Indicators and US Equity Correlation to Overall US Credit Spreads
G-255 credit spreads correlated directionally with US equity index movement for the 5th trading day in 6.
US equities are +2% over the past month; US credit spreads are slightly wider MOM
2025 was the second-weakest year in 32 for USD credit-equity correlated movement— ~75% last year.
Systematic Equity Trading Indicators January 12
• Attractive Long G-255 Equity Trade Indicators: 51 (includes both undervalued and equities priced at extreme discount (-2 from Friday and -22% below the 200-day moving average of all long-trade indicators).
• Short Equity Trade Indicators -10, (unchanged from Friday) and -14% below the 200-day moving average of all model short trade indicators).
Mondelez (MDLZ US Equity) dropped from the most attractive G-255 equity long list on Friday.
G -255 Issuer News Monday
Federal Reserve Chair Jerome Powell said the US central bank had been served grand jury subpoenas from the Justice Department threatening a criminal indictment.
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G-255 Credit and Sector Indicators for "Long Only" trading strategies January 12
*Represents change from prior day indicators
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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.