G-255 Specific Credit Sector Indicators January 8 – 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: 300 bonds ($735.6 billion) are overvalued with 233 short trade indicators.

• BBB Energy: 82 bonds ($98.6 billion) are overvalued with 53 short trade indicators.

• Single A Healthcare: 120 bonds ($165.9 billion) are overvalued with 99 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: 163 bonds ($171.2 billion) are overvalued, with 148 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 8

• 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 8

Systematic Trading Indicators Wednesday: None All but three (Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Montreal) of the G-255 issuers of corporate credit as of January 6–8 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 8, 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

Wednesday, January 8, 2026, saw G-255 equities cheapen materially as the publicly traded stock component of the world's largest corporate borrowers of corporate debt underperform the US' 2 major equity indexes. G – 255 bonds credit spreads widened by (+1.5bp) and showed a decline in valuation for just the second in 7 trading days.

Top Traded Issuers:

• Top traded IG G-255 issuer: T-Mobil (Baa2/BBB short credit/long equity) -1bp tighter Wednesday.

• Top traded HY G-255 issuer: CCO (B1/BB) +2bp wider Wednesday.

Key Trading Indicator Economic Results – Wednesday:

• Rail Traffic (AAR Report): For the week ending December 27, 2025, U.S. rail carloads totaled approximately 188,673, up 2.5% compared with the same week in 2024. Intermodal volume (containers and trailers) was 203,622 units, down 1.0% year-over-year.

• ADP Private-Sector Employment (December 2025): Private payrolls increased by 41,000 jobs, rebounding from a revised loss in November.

• ISM Services PMI (December 2025): improved to 54.4 (the highest reading since October 2024), from 52.6 in November. The Prices Paid subindex eased to a nine-month low of 64.3 Employment expanded for only the third time in the past ten months.

• JOLTS Job Openings (November 2025): dropped to 7.146 million the lowest level since September 2024 and the second-lowest reading since the pandemic.

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G-255 Systematic Model Update: Monday New Supply Review

January 8, 2026, Trading performance and Earnings Outlook

Equity Performance (Stocks)

G-255 equities cheapened materially on Wednesday, underperforming the two major U.S. equity indexes (S&P 500 and Nasdaq). This reflects a significant relative decline in stock prices among the world's largest corporate borrowers.

Despite the weakness, G-255 equities remain only modestly overvalued overall. The systematic trading model continues to show undervalued or "long" (buy) signals on 56 individual names.

Bond Performance (Credit)

G-255 credit spreads widened by +1.5 basis points (bp), marking the second valuation decline in the past seven trading days.

The systematic credit trading model recorded 1,109 short trade indicators on Wednesday—one of the top 15 highest short credit trading indicator readings of all time—following 1,122 on Tuesday. Over the past two years, only 16 trading days have registered 1,100 or more short indicators, and in every prior instance, this threshold preceded a pullback of at least +11 bp in overall G-255 credit spreads.

New Bond Issuance & Supply Outlook

Seven additional G-255 issuers (all but three non-U.S.) brought new bonds to market. Year-to-date in January 2026, 32 G-255 issuers have sold 90 bonds totaling $76.4 billion, of which only $23.3 billion came from non-auto-finance or Yankee bank issuers.

The model continues to recommend avoiding all new-issue supply until G-255 credit spreads widen by at least another +3.5 bp.

2026 is on track to be a record year for large-cap corporate debt issuance, driven by:

• More than $500 billion in maturing debt requiring refinancing

• An estimated $1 trillion in additional borrowing to fund dividend increases and share repurchases

This surge in supply has the potential to pressure bond prices lower if investor demand does not keep pace.

Earnings Season & Re-Leveraging

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

• The systematic trading model currently signals no incremental credit risk (neither new longs nor shorts) among these upcoming reporters.

• The model avoids adding credit exposure within 30 days of earnings reports, while equity positions remain available for daily trading opportunities.

• 143 of 255 issuers (56%) are re-levering (increasing net debt) heading into earnings season—the highest percentage in the 33-year history of the model.

• Only 29 of 242 equity issuers (12%) have reported operating cash flow declines in the current fiscal year based on the most recent results.

Broader Implications

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.

The elevated short indicator count reinforces a cautious stance, with historical precedent pointing to meaningful further spread widening in similar environments.

Key G – 255 corporates reporting in the 7 days:

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G-255 Credit Market Valuation and New G – 255 Supply January 8

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 7 G-255 issuers priced 16 new bonds totaling $11.75 billion. Notably, 12 of these bonds (75%) carried "long" trade indicators from the systematic model at issuance.

Year-to-date January G-255 supply now stands at approximately $76.4 billion. 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.

New Supply Performance & Model Stance

As previously noted, the G-255 trading model's new-supply indicator shifted to "avoid" following Monday's trading, recommending no participation until overall credit spreads widen by an additional +5 bp. Current widening since that signal stands at +1.5 bp.

Performance of recent supply:

• Monday's new issues are trading -1.6 bp tighter (better than issued levels)

• Tuesday's new issues are trading -0.6 bp tighter

Of the 68 bonds issued year-to-date with long indicators, none have yet reached the model's "avoid" trading threshold.

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 8

• Attractive Long Credit Indicators: 134 (+12 from and +22% 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 1109, (-13 from Wednesday and +99% 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

US equities are +1% 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—historic 80% vs. ~75% last year.

Systematic Equity Trading Indicators January 8

• Attractive Long G-255 Equity Trade Indicators: 56 (includes both undervalued and equities priced at extreme discount (+8 from Wednesday and -8% below the 200-day moving average of all long-trade indicators).

• Short Equity Trade Indicators -9, (unchanged from Wednesday) and -12% to the 200-day moving

average of all model short trade indicators).

MPC Marathon Petroleum is no longer a highest ranking long equity trade indicator.

G -255 Issuer News Wednesday

None

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G-255 Credit and Sector Indicators for "Long Only" trading strategies January 8

*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.