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Wed, November 12, 2025

Systematic Credit and Equity G-255 Trading Indicators for November 12, 2025

Good morning. Nothing like a good US Government budgetary continuing resolution to move US equity prices materially higher and US corporate bond valuations to move in the same direction but not with the same magnitude. We are solely quantitative in our analysis. But a continuing resolution (CR) to fund most of the federal government through January 30, 2026, without extending the benefits of the ACA (Affordable Care Act) only, as they say "kicks the (budgetary) can down the road."

The G-255 now includes 244 global equities with a combined market cap of $28 trillion, while the USD-denominated market cap

of their bonds exceeds $7 trillion and their global corporate bond footprint totals $12 trillion. This concentration of liquidity

and disclosure makes the G-255 the most actionable universe for real-time model recalibration, cross-asset signal

generation, and disciplined risk deployment.

The quantitative side of the continuing resolution?

  • A total of 44 million people were covered through the ACA Marketplaces and Medicaid expansion combined.

  • On average, ACA healthcare plan coverage premiums have risen 26% in 2025.

  • In 2024, the US Government spent approximately $874 billion on Medicare and an estimated $110 billion on ACA subsidies.

  • Medicaid and Affordable Care Act (ACA) subsidies together account for roughly 19–24% of the U.S. federal

budget (the budget is roughly $6.8 trillion).

  • Based on the minimum household income thresholds for qualifications for the Affordable Care Act (ACA) combined with subsidies, a cut in benefits would impact a minimum of 12% of US GDP.

  • Affordable Care and Medicare purchases account for roughly 42% of all US pharmaceutical revenue.

  • All 8 of the Democrat Senators that voted to end the US government shutdown will not stand for re-election in 2026.

The G – 255 trading impact of the continuing resolution?

  • G-255 Single A Healthcare credit spreads are 32.6 % wide of 52-week tights and have moved precipitously wider in the past 6 weeks. Average sector spreads are +54.3/UST curve (340 bonds $443 billion).

  • G-255 Single A Pharma credit spreads are 35.6 % wide of 52-week tights. Average sector spreads are +49.9/UST curve (340 bonds $443 billion).

  • G-255 BBB Healthcare credit spreads are 14 % wide of 52-week tights Average sector spreads are +92.9/UST curve (202 bonds $261 billion)

  • G-255 HY Healthcare credit spreads are 38.5 % wide of 52-week tights and have moved precipitously wider in

the past 6 weeks. Average sector spreads are +177.9/UST curve (36 bonds $50.9 billion)

  • G-255 Single A Healthcare Equities are +11.2 % YoY, +14.1% YTD of 52 tights and +3.95% WoW. PE = 21.4x

  • G-255 Single A Pharma Equities are +21.1% YoY, + 22.8% YTD and +4.6% WoW. PE = 20.7x

  • G-255 BBB Healthcare Equities are +3.5% YoY, + 14.6% YTD and +3.2% WoW. PE = 32.5x

  • G-255 HY Healthcare Equities are +6 % YoY, +17.84% YTD and +2.7% WoW. PE = 6.6x

Healthcare providers: United Healthcare (UNH A2/A+ short credit/equity) has underperformed the Single A Healthcare sector.

HCA (HCA Baa2/BBB- short credit/long equity and Centene (CNC BBB/A3 long credit/equity) have both outperformed the BBB Healthcare sector.

Recent trading has not created increased short or long trading indicators in credit or equities. US equities are trading at all-time highs, and credit is fairly valued as the US economy weakens and the prospect for a further US Government shutdown when the continuing resolution expires at the end of January 2025 without a continuation of ACA and Medicare benefits is more likely than not to occur.

G – 255 credit spreads (5,750 bonds) tightened by -2.14 bp* Monday while G-252 equities rose .32% this week

Key Earnings reports Friday and Monday

Paramount Skydance (PARA Baa3/BB+ long credit/short equity) reported improved balance sheet and weak earnings on Monday

Occidental Petroleum (OXY Baa3/BB+ long credit short equity) also reported improved balance and weak earnings.

Duke Energy (DUK Baa2/BBB short credit /long equity) reported higher debt and disappointing earnings.

G-255 equities remain slightly undervalued and G-255 bonds near fair value per our systematic trading model. Still, there are insufficient long trade indicators in G-255 corporate bonds to shift the model's daily trade allocation.

  • Top traded IG G – 255 issuers: Meta Platforms (AA3/AA- attractive long credit/equity) (-1 to -2bp) on Monday

  • Traded HY G – 255 issuer: Pemex ( B1/BBB attractive long credit) (-4 to -9bp) Monday

Key Systematic Trading model economic Indicators Reported Tuesday:

  • Same-store sales, rose 5.9% in the Nov. 8 week compared to a year earlier, Johnson Redbook says.

  • November sales were expected to be up 6.7% over the same month of the previous year.

Source: Bloomberg Capital Markets

  • UST 10-Year Rates: -16.9bp YoY and -43.2bp YTD.

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

Three G-255 issuers came to the USD market Monday bringing the November total to 13 issuers, 43 bonds and $53.1 billion of USD supply. The deal of the day was the 5-part $11.5 billion deal from Verizon, their largest transaction since purchasing the 45% of Verizon Wireless held by Vodafone in July 2014. I need not write any more on the subject as it would make both VZ and VODA shareholders and bondholders sick to their stomachs.

Caterpillar Finance, a serial issuer, priced its new 3Y bond well outside secondary levels. No rush—Caterpillar deals arrive like buses; miss one, another follows soon.

Enterprise Products tapped three existing June bonds at identical spreads. Question: why buy in November at June pricing after EPD's two weak earnings quarters? Hence, no opportunity per our systematic model.

  • Thus far, 13 of 43 November bonds have hit systematic model avoid levels.

  • October: 22 ($29.75B) of 71 bonds ($101.105B) reached avoid levels.

  • September: 62 ($55.6B) of 162 G-255 bonds hit avoid levels.

  • Thus Far 13 of the 43 bonds offered in November have reached their systematic model trading avoid point.

  • For the month of October 22 ($29.75 billion) of the 71 bonds ($101.105 billion) have reached their model avoid trading level.

  • For the month of September, 62 ($55.6 billion) of the 162 G-255 bonds sold have reached their avoid trading level.

  • Attractive Long Credit Indicators: 77, (-15 from Monday and -19% below the 200-day moving average of all long indicators. )

  • Attractive Long Credit Market Cap accounts for: 34% of all undervalued Systematic Credit capital.

  • Attractive Short Credit Indicators 544, (+83 from Monday and +7% above the 200-day moving average of all model short trade indicators).

  • Attractive Short Credit Market Cap accounts for: 36.7% 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 directionally for a second day Monday: credit spreads tightened while most equities posted large gains. 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

• Attractive Long G-255 Equity Trade Indicators: 78, (-7 from Monday and +26% above the 200-day moving

average of all model long trade indicators).

• Attractive Short Equity Trade Indicators 6, (unchanged from Monday and -27% 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 unchanged Tuesday and +.4% over the past week, while the S&P 500 rose +0.2% Tuesday and +1.8% over the past week.

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. This universe represents the most heavily indebted and actively traded global companies.

  • The 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 "255" reflects the number of issuers typically covered in a given cycle.

  • 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 (e.g., earnings beats/misses) influence credit

spreads. G-255 disclosures synchronize these inputs

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 234 undervalued bonds ($476.2 billion market value), with 77 long trade indicators across the 6,000-bond USD universe.

Short Opportunities

  • 1,455 bonds ($2.29 trillion) are overvalued per the stochastic credit trading model, with 544 short trade indicators.

  • U.S. Big 6 Banks (all ratings):No longer a short indicator as of October 22. Bonds +5 to +17.5 bp since 9/22.

  • Single A and BB Energy: No longer a short indicator as of October 27. Bonds +5 to +17 bp since 9/27.

  • Single A Healthcare: No longer a short indicator as of October 22. Bonds +4 to +15 bp since 9/22.

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

  • Autos: 130 bonds ($146.2 billion) are overvalued, with 79 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.

  • Closed Positions: United Health (A2/A) UNH 3.05 05/15/41 short trading indicator reached its avoid trading level Friday 10/31. John Deere Cr. (A2/A) DE 5.45 01/16/35 short trading indicator reached its avoid trading level Monday 11/3. BP (A2/A-) BPLN 3.06 06/17/41 short trading indicator reached its avoid trading level Tuesday 11/4. Citicorp (A3/BBB+) C Float 09/11/31 long trading indicator reached its avoid trading level Wednesday 11/5. General Motors Financial (Baa2/BBB) GM 2.7 06/10/31 short trading indicator reached its avoid trading level Friday 11/7.

  • Enter New Longs: The model added new issues Philip Morris (A2/A-) PM 4 1/4 10/29/32 and Lloyds Bank (Baa3/BBB-) LLOYDS 6 5/8 PERP as long trade indicators. Lloyds Bank (A3/A-) LLOYDS Float 11/04/31 was added by the trading model as another long trade indicator on Tuesday. 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 Friday.

  • Enter New Short Trades: The trading model added General Motors Financial (Baa2/BBB) GM 2.7 06/10/31 (short indicator) post new GM supply 7 trading days ago. 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 Monday.

Current Sample Systematic Basket bond trades based on trading strategy

New Trade Indicators Monday: None

Monday's Basket Trade Long/Short Ratio: 67%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – November 10, 2025)

Performance Summary: Total Trades: 184 (1% of total trade 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.