Systematic Credit and Equity G-255 Trade Indicators for November 7, 2025
Good morning. Thursday's USD risk trading mirrored Wednesday's trading. Equity indices gave back day-earlier gains while HY credit outflows slowly eroded BBB USD credit spreads, while US investment grade did what they do best on Thursday: they correlated to equity movement.
Systematic Equity Trading Indicators post earnings.
144 of 240 that will report earnings in this quarter have provided numbers. While over 90% of the USD corporate bonds of issuers either delevering their balance sheets or maintaining net cash (there are 4 such sectors in the corporate bond world where, on a summed basis, the sector has "net cash") don't trade anywhere near levels that would create a long trade indicator from our stochastic trading model, 87% of the underlying equities where operating cash flow is growing more than 5% YoY trade either below the trading model's "attractive long" equity price level or within 2.5% of it.
US Regional Banks (all have reported 3Q results).
The entire US regional bank trading sector has "net cash" on a combined basis. (Please see above.) Are the bonds attractive at current trading levels? No.
US regional Bank saw every aspect of their operation grow and improve in 3Q 2025
US Regional Bank returns to shareholders have grown 50% YoY despite having a "Net Cash" Balance Sheet
Do US Bank Equities have long systematic trade indicators? Most do at current levels
What is the trade? For now, long US Regional Bank equities (bonds are overvalue) There is more sector correlation information on page 4.Sector Example Systematic Credit Trading Indicators (please see pages 7 - 9)
Weekly corporate credit inflows were mixed. Investment grade corporates saw above-average inflows into ETFs and mutual funds. High Yield saw outflows for the third week in six. G-255 equities continue to trade either below or within 2.5% of attractive on the long side, and 90% of the equities with short signals trade below attractive short trade indicator levels. G-255 equities are slightly attractive. G-255 corporate debt valuations bounced, retraced Wednesday's rally on Thursday after trading, and are near their widest trading levels since May but are still modestly overvalued.
Top Short-Indicated Sector:
BBB Autos (All currencies)
Top 3 Long-Indicated Sectors:
US Regional Banks (USD)
UK Banks (all currencies)
U.S. BBB TMT (all currencies)
Trading Allocation Strategy:
47.5% Long: Undervalued, deleveraging bonds.
32.5% Short: Overvalued bonds in releveraging sectors.
20% Front-End: 75% in floating-rate notes (<3 years).
Risk Management:
The model avoids adding risk to G-255 issuers reporting within 30 days due to global regulatory requirements for material event disclosures.
Material Economic Indicators Reported Thursday:
US companies announced 153,074 job cuts in October, according to data from Challenger, Gray & Christmas.
Credit Trading Thursday
Investment-Grade (IG) Trading
Volume: +10.6 % above average with META, Oracle and Alphabet accounting for 8% of the volume
G-255 Issuers: 98 of the top 100 traded issuer bonds accounted for 99% of top 100 issuer volume and 95% of total TRACE volume.
High-Yield (HY) Trading
Volume: +17% above average.
G-255 Issuers: 9 of the top 25 traded bonds accounted for 41% of top 25 issuer volume and 38% of total TRACE volume.
Thursday Credit Market Movement
US CDX Index: tighter +.8bp at 49.4 bp (includes -4 bp of forward roll)
US IG Cash Spreads: (1 to +3 bp) wider with materials underperforming.
CDX HY Index: -0.2 bp at 107 (per Bloomberg)
HY Cash Bonds were wider Thursday, with Technology underperforming.
High-Yield Activity
• Dealers bought $900mm of high yield bonds on Thursday.
Most Bought HY Bonds: I Heart Communications (IHRT Caa1/CCC+)
Most Sold HY Bonds: American Axle ( B3/B+ )
Investment Grade Activity
Dealers bought $ 900 million of IG bonds on Thursday.
Most Bought Sector: BBB TMT
Fiserv (FI Baa2/BBB attractive short)
T-Mobil (TMUS Baa1/BBB attractive short)
Most Sold Sector: Big Six Banks
Goldman Sachs (GS A2/Baa3 attractive short)
Morgan Stanley (A2/A- attractive short)
Long Opportunities
Focus on de-leveraging issuers, including Single A-rated global Autos, BBB-rated TMT, BBB-rated Energy, Euro Yankee Banks, and Floating Rate Notes.
Valuation Insight: The stochastic credit trading model identifies 168 undervalued bonds ($302 billion market value), with 74 long trade indicators across the 6,000-bond USD universe.
Short Opportunities
1,490 bonds ($2.34 trillion) are overvalued per the stochastic credit trading model, with 538 short trade indicators.
U.S. Big 6 Banks (all ratings):No longer a short indicator as of October 22. Bonds +4 to +15 bp since 9/22.
Single A and BB Energy: No longer a short indicator as of October 27. Bonds +4 to +17 bp since 9/22.
Single A Healthcare: No longer a short indicator as of October 22. Bonds +3 to +13 bp since 9/22.
Single A Industrials: No longer a short indicator as of October 22. Bonds +5 to +15 bp since 9/22.
BBB Autos: 81 bonds ($97.1 billion) are overvalued, with 55 short trade indicators
U.S. IG Credit Valuation and Spreads
U.S. IG Credit Valuation and Spreads
Credit Spread Recovery: U.S. credit spreads have recovered 43% of the widening observed from November 12, 2024, to April 10, 2025.
Model Valuation: IG and HY markets show modest overvaluation. Post earnings announcements from 143 of the world's 255 largest issuers of corporate debt 144 issuers are increasing leverage.
2025 10-Year Credit Spreads
Year-over-Year (YoY): are wider compared to last year.
Year-to-Date (YTD): are wider.
UST 10-Year Rates: -22.1bp YoY and -46.7bp YTD.
Bloomberg 10Y credit spreads are derived by taking the Moody's relevant index yield and subtracting the UST 10Y YTM
1 G-255 new issue Thursday as the market began to meaningfully digest Technology supply.
Equinor completed (EQNR Aa3/AA- delevering) its second USD bond offering of 2025 and second since 2020. The company tapped previously issued EQNR 4 1/4 06/02/28 and EQNR 4 1/2 09/03/30 ($250 million each), both within +/- 2bp of the initial transactions priced in June. Equinor sold $1 billion of new 10Y priced reasonably according to our trading model.
Short and intermediate investment-grade bonds: $3.1b inflow vs. $1.82b inflow in the week ended November 5 according to LSEG.
High-yield notes: $955.1m outflow vs. $459.1m inflow
Treasuries: $289.2m outflow vs. $315.3m inflow
US leveraged loans: $136.8m outflow vs. $132m outflow
Mortgage-related: $454.1m outflow vs. $85.5m inflow
IG corporate bonds are the only sector with significant inflow from both ETFs and Mutual Funds.
The increased inflow in IG corporate ETFs continues to keep that group slightly overvalued as the market awaits the next "AI mega-deal" post Meta & Alphabet selling $55 billion of new bonds globally in the past week.
While US credit spreads are wider, the next catalyst to move markets will be (1) equity price movement, (2) fund inflow/outflow, or (3) more large supply.
Given the use of the corporate bond market for dividends and share repurchases, further equity price pullback would most likely lead to further corporate bond supply.
US Equity Correlation to Overall US Credit Spreads
US equities and credit markets correlated directionally third straight trading day and the 12th trading day in 18. 2025 remains the second-lowest directional correlation year for USD credit and equities.
From a sector specific view:
US Consumer Equities and US Consumer IG bonds have had the second strongest directional correlation in 2025.
US Technology Equities and US Technology IG bonds have had the weakest directional correlation.
US Industrial Equities and US Industrial IG bonds have had the strongest directional correlation in 2025.
G – 255 issuer news
Comcast Corp CMCSA A2/A-., attractive long credit/equity, is in talks to buy ITV Plc's media and entertainment unit to add to it's Sky Holdings unit. The deal is valued @ £1.7 billion. ITV's market share of the UK market is just over 5%.
Attractive Long Indicators: 75, +19 from Thursday and -27% below the 200-day moving average of all model long trade indicators.
Attractive Long Market Cap accounts for: 35% of all undervalued Systematic Credit capital.
Attractive Short Indicators 538, -73 from Thursday and +6% above the 200-day moving average of all model short trade indicators
Attractive Short Market Cap accounts for: 35% of all overvalued Systematic Credit Capital
Systematic Portfolio Trading Model Indicators
Prioritize Long Positions: Target deleveraging new issues with attractive valuations, focusing on 5-year maturities.
Short Positions: 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.
Systematic Credit Trading Strategy – November 7, 2025:
Closed Positions: United Health (A2/A) UNH 3.05 05/15/41 short trading indicator reached its avoid trading level Friday. John Deere Cr. (A2/A) DE 5.45 01/16/35 short trading indicator reached its avoid trading level Monday. BP (A2/A-) BPLN 3.06 06/17/41 reached short trading indicator its avoid trading level Tuesday. Citicorp (A3/BBB+) C Float 09/11/31 long trading indicator reached its avoid trading level Wednesday.
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 last week. 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.
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.
Thursday's Basket Trade Long/Short Ratio: 70%
Our systematic trading model uses predefined, back-tested processes driven by issuer data and market parameters, targeting ±5 basis points of spread movement in minimal trading days while minimizing volatility risk. The model employs only publicly available data.
Current Sample Systematic Basket bond trades based on trading strategy
New Trade Indicators Thursday: None
Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – November 7, 2025)
Performance Summary: Total Trades: 184 (1% of total trades).
Long Indicators: 125/144 reached avoid-trading levels, tightening by -9.23 bp.
Short Indicators: 32/39 reached avoid-trading levels, widening by +5.73 bp.
Remaining Longs: 19 widened by +2.8 bp.
Remaining Shorts: 8 tightened by -9.16 bp.
Average Spread Movement: ± 6.57 bp in the recommended direction.
Success Rate: 87% of indicators reached avoid-trading levels, which is slightly below normal.
Average trade holding period: 22.2 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.