A rally in both equity and US corporate debt markets on Wednesday didn't move most of the Systematic Trading indicators overnight. Lowe's (LOW) produced earnings equally inconclusive to those reported by Home Depot (HD) on Tuesday, but the mechanical "beat expectations" trade kicked in and LOW equity finished almost 3% higher even as 40% of Wall Street analysts were lowering their LOW equity price targets. (LOW Baa1/BBB+) is re-levering its balance sheet but its bonds aren't expensive enough to short.

but first… Nvidia….

So, I am now compelled to write about Nvidia (NVDA) earnings. They beat analysts' expectations. I guess that covers my expertise on that issuer!

Key G-255 credit trading indicators Wednesday

We saw a second week of dedicated corporate IG and HY ETF outflows, and the HY outflow is accelerating (see details on page 4). It will be difficult for credit spreads to improve if outflows persist.

Key G-255 equity trading indicators Wednesday

Both Meta (META) and Microsoft (MSFT) are long equity trade indicators for the first time since April. We have read numerous "commentaries" about the $27 billion Hyperion Data Center Campus in Richland Parish, Louisiana. And in truth there is enough bull…err "excrement" in those commentaries to fertilize the Sinai Desert.

Meta off-balance-sheet transactions – Fact vs. Fiction

Fact: The transaction will be managed and primarily owned by Blue Owl with Meta as the lessee, providing a 10-year residual value guarantee and a 20-year triple-net lease covering property taxes, insurance, and maintenance.

Fiction: The transaction will keep $27 billion of debt off Meta's balance sheet. Not really.

• The equity investment will go into the "non-marketable" investment asset category. That asset has grown from $6 billion to $25 billion in the first 9 months of 2025.

• Under accounting rules, this guarantee is considered a contingent liability because the actual payment is not certain and depends on a future event (Meta choosing to terminate the lease and the property's market value at that time). As such, it is disclosed in the detailed notes accompanying the financial statements, where such potential obligations are described.

• Right-of-Use (ROU) Asset: An asset representing Meta's right to use the facility for the lease term is recorded in the non-current assets section.

• Lease Liability: A corresponding liability, equal to the present value of the lease payments, is recorded in the liabilities section (split into current and non-current liabilities). Those liabilities are up 14% YTD and stand at $20.1 billion. The liabilities associated with the data center are on the Meta balance sheet; they just don't show up as debt.

Fiction: This transaction highlights a "debt bubble" in the US corporate operating structure.

• LOL. This is the third such transaction Meta has entered (similar deals in Beaver Dam, Wisconsin and New Albany).

• That explains the increase in "non-marketable" equity and lease liability.

Fiction: This transaction will lower Meta's operating cash-flow margin owing to the lease payments.

• It might very well raise Meta's income tax rate by a couple hundred basis points, but in fact these transactions will expand Meta's cash-flow margin owing to the incremental unit revenue generated through all aspects of its business (see today's earnings digest).

Fiction: This is artificially keeping Meta's investment-grade ratings higher than they should be.

• Bigger LOL. Meta generates over $100 billion of operating cash flow that is growing more than 20% per annum.

• Whether the company has $50 billion of net cash or $50 billion of net debt at any point in time would have no impact on the issuer credit rating or its credit spreads.

Last Fiction (I am out of space): This is the tip of the iceberg as it relates to the next credit crisis.

• Huh? There are six key corporate issuers that would be at the heart of any US debt crisis that are not key names in these transactions – JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, or Morgan Stanley.

My fiction (as it relates to Meta anyway)

Meta's greatest asset is its investment in its subscriber base communications capabilities. All of Meta's apps are All of Meta's apps are free; subscription fees only apply to specialized applications. The revenue and margin potential of the 4 billion

Meta subscribers when AI is fully added to the product boggles the mind. Meta equity remains the second most attractive G-255 equity long indicator in the systematic trading universe (and that's without the fiction).

We saw a second week of outflow in dedicated Investment grade and High Yield US corporate bond ETFs. However, the outflow was far more pronounced in High Yield than in IG – we will see US Mutual fund flow data later today as well as HY and IG credit valuations this evening it is possible we see a change in Systematic trade allocation post the trading indicators.

• Top traded IG G – 255 issuer: Meta Platforms (Aa2/A- attractive long credit and equity) (-1 to -2bp) on Wednesday

• Top Traded HY G – 255 issuer: Molina Healthcare (MOH Ba2/BB) (+3 to +5bp) on Wednesday

Key Systematic Trading Model Economic Indicators Reported Wednesday:

• US September nonfarm payrolls reached 119,000, but the unemployment rate continued to rise.

• The US unemployment rate rose 4.4%o its highest level in four years.

• Weekly rail traffic was 493,880 carloads and intermodal units, - 4.5% compared with the same week last year.

• Total carloads for the week ending November 15 were 223,101 carloads, -0.2% compared with the same week last year

• U.S. weekly intermodal volume was 270,779 containers and trailers, -7.7% percent compared to 2024.

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G-255 Credit Market Valuation and New G – 255 Supply November 20

• UST 10-Year Rates: -29.6bp YoY and -45.9bp YTD.

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

We have probably seen the last G-255 supply prior to December.

In November 22 G -255 issuers came to market selling 66 bonds totaling $86.6 billion of USD debt. Wednesday led by Pfizer (PFE A1/AA) printing $6 billion of new bond in 6 different offerings. 5 issuers (Novartis NOVNVX Aa3/AA-) Alphabet (GOOG Aa3/AA-), Verizon (VZ Baa1/BBB+), Amazon (AMZN A1/AA-) and Pfizer (PFE A1/AA) accounted for 31 of the bonds and $55.5 billion of the market capital. Thus far, only the majority of the Amazon bonds have reached unattractive levels post new supply while the NOVNVX 4.6 11/05/35, NOVNVX 5.2 11/05/45, NOVNVX 5.3 11/05/55 all trade outside new issue spread.

Of the G-255 bonds issued in 2025 904 of 1054 (86%) reached their avoid trading levels.

Corp Bond ETF flows fell by -$589mm billion to just $218 mm in the week ending November 19, 2025

• Dedicated Investment Grade corporate bond ETFs had net outflow of -$355mm compared to -$203mm last week.

• Dedicated High Yield corporate ETFs have net outflow of $-1.411 billion compared to -$399mm last week

• Government bond ETFs expanded by $262.7m to $4.29b

• Mortgage-backed bond ETFs swung by $1.84b to outflows of $1.66b

• IShares 7-10 Year Treasury Bond ETF had the biggest inflow, of $3.51b

• IShares MBS ETF had the biggest outflow, of $1.8b

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G-255 Credit and Equity Market Indicators November 20

Attractive Long Credit Indicators:

• 96, (-3 from Wednesday and -2% below the 200-day moving average of all long indicators). 20 long credit indicators are not included owing to the underlying equity price declines of more than -10% in the past 30 calendar days.

Attractive Long Credit Market Cap accounts for:

• 35% of all undervalued Systematic Credit capital.

• Attractive Short Credit Indicators 467, (-2 from Wednesday and -11% below the 200-day moving average of all model short trade indicators).

• Attractive Short Credit Market Cap accounts for: 30.5% 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 correlated for a fifth day. As for G – 255 issuer credit was tighter as US equities bounced off a 4 slide.

• US equities are roughly -2.75% lower WoW; US credit markets are slightly wider in the week ended November 19

• US equities are -.5% lower over the past month, US credit spreads are now materially wider.

2025 is on track for the second-weakest year in 32 for USD credit-equity correlated movement—historic 80% vs. ~73% this year.

Systematic Equity Trading Indicators November 20

• Attractive Long G-255 Equity Trade Indicators: 68 (includes both undervalued and equities priced at

extreme discount (+1 from Wednesday and +12% to the 200-day moving average of all long trade indicators).

• The $3.6 trillion of additional attractive G-255 Equity Trade capital is the result of one issuer becoming a long

trade indicator: Microsoft (MSFT)

• Attractive Short Equity Trade Indicators 8, (unchanged from Wednesday and 15% below the 200-day moving average of all model short trade indicators).

• For G-255 issuers, equity prices of the world's most indebted companies were +.22% Wednesday and -2.75% over the past week, while the S&P 500 rose -.38% Wednesday and fell -3.05% over the past week.

• Why are G-255 equity issues outperforming the S&P and Dow? A: Over 30% of the 243 publicly traded G -255 equities have already reached their 2025 low price.

G-255 Equity and Credit Indicators – How we use them

• G-255 issuers are the world's 255 largest issuers of corporate debt, as tracked and analyzed in proprietary systematic credit trading model featured in the "Systematic Trading" Report on Substack and universe represents the most heavily indebted and actively traded global companies.

• G-255 refers to a standardized reporting framework used by USD bond issuers to disclose quarterly financial

results. It's not a regulatory mandate but a market convention tracked by systematic credit analysts and traders. The exact list of 255 issuers isn't publicly detailed but aligns with globally indebted giants.

• Indicator calibration: Credit trading models use earnings data to recalibrate valuation indicators, such as spread to-curve, earnings momentum, and debt ratios.

• Bond-level granularity: Many G-255 issuers have multiple bonds outstanding. Systematic models assess

relative value across the capital structure, flagging overvalued or undervalued bonds.

• Equity-credit linkage: For dual-listed issuers, equity signals (cashflow comparisons and returns to

shareholders influence credit spreads. G-255 disclosures synchronize these inputs

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G-255 Specific Credit Sector Indicators November 20

Long Opportunities:

Focus on de-leveraging issuers, including Single A and BBB-rated TMT, BBB-rated Energy,

Euro Yankee Banks, and Floating Rate Notes.

Valuation Insight:

• The stochastic credit trading model identifies 256 undervalued bonds ($433.9 billion market

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

• At present only UK Banks (10) and Single A rated TMT sectors have 10+ long individual bond trade indicators.

Short Opportunities

• 1,506 bonds ($2.334 trillion) are overvalued per the stochastic credit trading model, with 467 short trade indicators.

• U.S. Big 6 Banks (all ratings):No longer a short indicator as of October 22. Bonds +6 to +18.5 bp since 9/22.

• Single A and BB Energy: No longer a short indicator as of October 27. Bonds +6 to +18 bp since 9/27.

• Single A Healthcare: No longer a short indicator as of October 22. Bonds +5 to +15 bp since 9/22.

• Single A Industrials: No longer a short indicator as of October 22. Bonds +6 to +20 bp since 9/22.

• Autos: 164 bonds ($164.4 billion) are overvalued, with 80 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, avoiding 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 67.5% long position threshold is reached.

• Current Status: Add new supply trades where the issuer is deleveraging; add new issue bonds where spreads 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 65% long hurdle, initiate short positions in releveraging issuers (avoiding 7-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 November 20

• Closed Positions: The Cigna (Baa1/A-) CI 2.4 03/15/30 (short) and Amazon (A1/AA) AMZN 4.35 03/20/33 (long) both reached their avoid trading levels Wednesday November 19.

• Enter New Longs: The trading model added Meta (AA3/ AA-) META 4 7/8 11/15/35 and META 5 1/2 11/15/45 new supply long trade indicators on 11/7. The new Amazon (A1/AA) AMZN 4.35 03/20/33 was added to the Model Trade on Monday.

• Enter New Short Trades: The trading model added Cigna (Baa1/A-) CI 2.4 03/15/30 and HCA (Baa2/BBB-) HCA 3 5/8 03/15/32 as short trade indicators 11/3. General Motors (Baa2/BBB) GM 3.6 06/21/30 was added as a short trade on Monday.

Current Sample Systematic Basket bond trades based on trading strategy November 20

Systematic Trading Indicators Wednesday: The Cigna (Baa1/A-) CI 2.4 03/15/30 (short) and Amazon (A1/AA) AMZN 4.35 03/20/33 (long) both reached their avoid trading levels

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G-255 Credit Basket Trade Statistics

Wednesday's Basket Trade Long/Short Ratio: 70.3%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – November 19, 2025)

Performance Summary: Total Trades: 186 (1% of total trade indicators).

• Long Indicators: 125/144 reached avoid-trading levels, tightening by -9.23 bp.

• Short Indicators: 33/40 reached avoid-trading levels, widening by +5.70 bp.

• Remaining Longs: 20 widened by +4.62 bp.

• Remaining Shorts: 8 tightened by -7.98 bp.

• Average Spread Movement: ± 6.47 bp in the recommended direction.

• Success Rate: 86% of indicators reached avoid-trading levels, which is slightly below normal.

• Average trade holding period: 22.8 days (above average)

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.