Systematic Credit and Equity G-255 Trading Indicators for January 21, 2026
G-255 Specific Credit Sector Indicators January 21 – Long Only Indicators on Page 8
G-255 Overview: What It Is and Why It Matters
• Definition: G-255 tracks the world's 255 largest corporate issuers, each with at least $15 billion in liquid tradable debt across global currencies. It includes ~6,000 USD bonds (average $1.16 billion per bond) and 242 publicly listed equities with a combined market cap of ~$47 trillion—60% larger per issuer than the S&P 500 average. 80 of those equities are non-U.S. domiciled.
• Key Differentiator: Purely systematic and stochastic absolute value model: signals are generated automatically with zero human input, using finite math and stochastic processes applied solely to each security's own 52-week public pricing history (plus earnings data and balance sheet/leverage recalibration). No peer comparisons, forecasts, macro overlays, or sentiment analysis of any kind. This issuer-isolated approach detects extreme trading levels relative to each name's individual historic norms, covering ~85% of daily TRACE-reported USD corporate bond trades (95% investment-grade, 48% high-yield). Back-tested tracking accuracy of 97.5% highlights its quantitative purity and rule-based execution.
• Equities + Debt Capital Structure Integration: The fully automated model combines equity (growth, volatility, momentum) and bond (credit spreads, debt dynamics) data using only each issuer's 52-week pricing and fundamental history. This linkage identifies cross-asset extremes—such as equity momentum diverging from spread movements—to produce unified, objective long/short indicators for both asset classes, with no external sentiment or discretionary factors.
Long Opportunities: G-255 Credit and Equity Sectors are shown with the most long trade indicator data
Focus on de-leveraging issuers in Credit: Single A and BB rated TMT, Single A rated Healthcare, UK Banks, US
Regional Banks, Canadian Banks and Floating Rate Notes.
Focus on Equity issuers with YoY operating cash flow growth: TMT, Healthcare and US Utilities
• Valuation Insight: The stochastic credit trading model identifies 190 undervalued bonds ($301 billion market
value), with 117 long trade credit indicators across the 6,000-bond USD universe. The model sees 57 undervalued
G -255 equities ($17.74 trillion).
Short Opportunities – Equity and Credit sectors shown with the most recent short trade indicator date for comparison
• 1,583 bonds ($2.679 trillion) are over-valued per the stochastic credit trading model, with 1276 short trade indicators.
• 16 G-255 equity issuers are overvalued ($1.564 trillion) with 12 G-255 short equity trade indicators.
Largest De-levering, Re-levering and cash flow positive and cash flow negative sectors for both G-255 equities and credit are shown above.
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Systematic Portfolio Daily Credit Trading Model Indicators
• Long Indicators: Target deleveraging new issues with attractive valuations, focusing on 7-year maturities.
• Short Indicators: Target re-leveraging issuers trading at the deepest discount from their model avoid point; avoid 7-year maturities due to low attractiveness and focus on 2031 maturities for best short opportunities.
• 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 50% 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 re-leveraging 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.
G-255 Specific Bond Trading Indicators January 21
• Closed Positions: Lowe's (Baa2/BBB+) LOW 4 1/2 10/15/32 reached its avoid trading level on Friday January 2. Lloyds Bank (A3/A-) LLOYDS Float 11/04/31 reached its avoid trading level on January 8. Deutsche Bank NY (Baa1/BBB) DB 4.95 08/04/31 reached its avoid trading level on Tuesday January 13. On Friday 1/16/26 McDonald's (Baa1/BBB+) MCD 5 02/13/36 reached its avoid trading level.
• Enter New Longs: 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 were added as a G – 255 de-levering new issue trading more than +2bp to NIP. On Wednesday 1/14/26 Bank of New York (Aa3/A+) BK 4.026 01/22/30 was added as a G – 255 new issue long indicator
• Enter New Short Trades: The model again produced a short trade indicator for General Motors (Baa2/BBB) GM 3.6 06/21/30 on Monday 12/8/25. On Friday 1/16/26 the G-255 trading model added Morgan Stanley (Baa1/BBB+) MS 5.948 01/19/38 as a secondary short trade indicator.
Systematic Trading Indicators Tuesday: Royal Bank of Canada (A1/A) RY 4.305 11/03/31 reached its avoid trading level.
Wednesday's basket trade position indicator: 50% long
Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – January 20, 2026)
Performance Summary
• Total Trades: 195 (2025 full year); 24 in 2026
• Long Indicators (2025): 136 out of 150 tightened by an average of -9.2 bp. In 2026 4 of 14 tightened by (-6.3bp).
• 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): 10 positions tightened by -2.16 bp
• Remaining Shorts (2025): 9 positions tightened by -19.23 bp.(2026): 10 positions tightened by - .37 bp
• Average Spread Movement (2025): ±6.73 bp in the recommended direction. (2026) ±1.79 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).
We will update the G – 255 highest long/short trade indicators and changes for the month of January over the coming weekend.
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Current Sample Systematic Basket Credit/Equity trades based on trading strategy January 21
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G-255 Trade Sizes and Systematic Trade Process for Debt and Equities
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 6,020 G-255 USD bonds in circulation.
• 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 Indicators USD Trading Process and Size – Overall Strategy Is Designed To Trade $3 Trillion of Assets
• 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.
Equity and Credit Trading and Sector Indicators and Tuesday Trading
Tuesday, January 16, 2026, Global equities continued to face pressure which began on Friday from mixed U.S. bank earnings reports and escalating geopolitical tensions involving Greenland, U.S.-NATO relations, and trade with Europe. We mentioned yesterday, the EU and some European nations have long sought ways to reduce their reliance on U.S. markets and investments. The recent threats of a 10% tariff (the "bank credit cap" discussion) and the renewed "Greenland debate" are now providing convenient excuses for European governments and G-255 companies to pull back from U.S. exposure. The "buy the dip" trade is ostensibly a US capital trade. It will be tested on Tuesday.
The G-255 credit trade indicator dipped below the 1,300+ short trade indicators from over the weekend. However, G-255 credit is still dramatically overvalued. G-255 equities are only modestly overvalued post Tuesday's pull – back in global equity prices.
Key Trading Indicator Economic Results – Tuesday:
Philadelphia Fed's firm-level general-business activity index for services rose to 16.2 in January, up from 0.8 in December.
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G-255 Systematic Model Update: January 20 Trading and Earnings Reports
Tuesday's Earnings
While we have seen positive momentum in several of the US Federal Reserve Services and Manufacturing surveys in January, the recovery is off a pretty weak fourth quarter. G-255 earnings reports from US Bancorp (USB A3/A short credit/long equity), Fifth Third Corp (FITB Baa1/BBB+ long credit/equity), KeyCorp (Baa2/BBB), and United Airlines (UAL Baa3/BBB- long credit/short equity) were uninspiring. No double-digit revenue growth, and while all posted 10%+ reported earnings growth, the reports were loaded with the magic word, yes "adjusted." The vast majority of the earnings growth from all 4 G-255 issuers is coming from cost cutting. Bloomberg headlined the "earnings beats" and the positive outlooks, but there are no estimates for 10% revenue growth for any of the above issuers. There were no changes in any G-255 equity or credit trade indicators post earnings reports on Tuesday.
Later today we hear from Ally Financial (ALLY), Truist (TFC), Charles Schwab (SCHW), Prologis (PLD), and Johnson & Johnson (JNJ). To expect anything different than what we have seen from the first 15 G-255 earnings reports of 2026 on Wednesday is not very reasonable.
The Trump Trade Is Getting Challenged
Key Data Points (as of late 2025 / early 2026):
• Total foreign revenue for the S&P 500: Approximately 41% of total revenues come from outside the US (per FactSet/Apollo Chief Economist data through 2024–2025, with similar trends persisting).
• Europe-specific exposure (the core of NATO non-US exposure, as most NATO members are European): Europe accounts for roughly 14% of S&P 500 revenues (per Goldman Sachs and other breakdowns around mid-2025).
• Foreign holdings of U.S. Treasury securities totaled $9.355 trillion (all-time high, up from $9.243 trillion in October 2025). The total publicly held U.S. debt (debt held by the public, excluding intragovernmental holdings like Social Security Trust Fund) is approximately $29–30 trillion in early 2026 (gross federal debt exceeds $38 trillion, but ~20–25% is intragovernmental). Foreign holdings account for roughly 30–32% of publicly held U.S. debt.
• Foreign nationals and entities (including governments, central banks, institutions, and private investors outside the U.S.) hold approximately 18% of total U.S. equities outstanding.
The net here is that the instability of US policy both domestically and internationally may (and I repeat MAY) finally be "coming home to roost."
The US' largest import is not oil; it's capital. Non-US entities own close to 30% of US assets and real estate. So, while the actual impact of Greenland, attempts to harass the US Federal Reserve, and control US interest rates may ultimately turn into most of Trump White House rhetoric, returns outside the US over the Trump term in office have been better than in the US with significantly less volatility.
As we noted yesterday, the "buy the dip" aspect of the Trump trade is US capital centric. There is, as we have noted, $4 trillion of cash in US money markets, so we will see if the myriad of senseless headlines actually leads to capital outflow from the US risk markets.
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G-255 Credit Market Valuation and New G – 255 Supply January 21, 2026 On a Risk/Reward basis, High Yield bonds have far outperformed Investment Grade in 2025
• US Credit Spreads reached their tightest point of the year on Friday, February 21, 2025, and widest on Tuesday, April 10, 2025.
• YOY change in the UST 5Y: -55.7 bp.
• YOY change in the UST 10Y: -30.2 bp.
We are now flat in terms of Credit Spreads YoY.
Bloomberg 10Y credit spreads are derived by taking the Moody's index yield and subtracting the UST 10Y YTM.
US fund flows for the week ended Jan. 14, compared to a week earlier, according to LSEG Lipper:
• Short and intermediate investment-grade bonds: $2.2b inflow vs. $4.29b inflow
• High-yield notes: $371.3m outflow vs. $269.5m inflow
40 G – 255 issuers have come to market in USD in January 2025 total 119 bonds and 121.45 billion of market capital. 73 of the 119 bonds have reached their avoid trading point according to the G-255 credit trading model.
• Across all 2025 G-255 new issues, 93% 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, 1,028 of 1,100 G-255 USD bonds issued (totaling $1.147 trillion in notional) have hit avoid signals.
• All 20 December 2025 G-255 new issue trade indicators were reached in less than 22 trading days.
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G-255 Credit and Equity Market Indicators January 21
• Attractive Long Credit Indicators: 117 (+25 from Tuesday and +14 % above the 200-day moving average of all long indicators).
• Attractive Long Credit Market Cap accounts for: 58% of all undervalued Systematic credit capital.
• Attractive Short Credit Indicators 1292, (-17 from Tuesday and +126% above the 200-day moving average of all model short trade indicators). Short Credit Market Cap comprises 82% of all overvalued Systematic credit capital.
G-255 Equity Trade Indicators and US Equity Correlation to Overall US Credit Spreads
G-255 credit spreads have correlated directionally with US equity index movement for 9 of the first 12 trading days of 2026.
US equities are unchanged over the past month; US credit spreads are now materially tighter MOM
Systematic Equity Trading Indicators January 21
• Attractive Long G-255 Equity Trade Indicators: 57 (includes both undervalued and equities priced at extreme discount) +5 from Tuesday and -1% below the 200-day moving average of all long-trade indicators.
• Short Equity Trade Indicators -12, (unchanged from Tuesday) and +9% above the 200-day moving average of all model short trade 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.