G-255 Specific Credit Sector Indicators January 2 – Please see page 5 for G-255 Equity Indicators

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 191 undervalued bonds ($335 billion market

value), with 97 long trade indicators across the 6,000-bond USD universe.

• At present Single A and BB 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

• 1,554 bonds ($2.72 trillion) are overvalued per the stochastic credit trading model, with 1021 short trade indicators.

• U.S. Big 6 Banks: 301 bonds ($780 billion) are overvalued with 207 short trade indicators.

• BBB Energy: 83 bonds ($99.8 billion) are overvalued with 58 short trade indicators.

• Single A Healthcare: 125 bonds ($180.4 billion) are overvalued with 96 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: 168 bonds ($178 billion) are overvalued, with 139 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 2

• 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.

• Enter New Longs: On Tuesday December 2, the Florida Power & Light (Aa2/A+) NEE 5.6 02/15/66 and on Wednesday December 3, Celanese (Ba2/BB+) CE 7 02/15/31 were added as new issue long indicators. 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 2

Systematic Trading Indicators Wednesday: None

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Wednesday's Basket Trade Long/Short Ratio: 61%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – January 2, 2026)

Performance Summary

• Total Trades: 195 (2025 full year); 25 (early 2026)

• Long Indicators (2025): 136 out of 150 tightened by an average of -9.2 bp.

• 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, December 31, 2025

Trading volume on Wednesday was notably weaker than on Monday and Tuesday.

• Despite modest pullbacks in select G-255 equity prices, the proportion of undervalued equity trade indicators dropped below 35% across the 242 global corporate debt issuers with more than $15 billion in tradable debt outstanding. This shift occurred amid reduced overall equity and corporate debt trading volumes in the holiday-shortened week.

• We will defer integrating supply/demand inputs into the trading model until the first-week of January 2026 fund flow data becomes available, due to potential distortions in year-end figures and the observed lower trading volumes.

• With no significant new primary issuance and more than $50 billion in G-255 bonds called or matured during the period, substantial net buying from investment-grade (IG) end-users materialized as the week progressed.

• Historical correlations between G-255 underlying equity prices—particularly in the Technology, Media & Telecom (TMT) and Consumer sectors—and corresponding 10-year issuer credit spreads suggest that continued equity appreciation in these areas is likely to drive further spread tightening in their respective credit sectors.

• This year-end environment reflects typical holiday seasonality, with cautious positioning ahead of renewed data inflows in early 2026. If you'd like additional sector details or forward-looking signal implications, let me know!

Top Traded Issuers:

• Top traded IG G-255 issuer: Merck (Aa3/A+; long credit/equity) – tightened -3bp Wednesday.

• Top traded HY G-255 issuer: Venture Global (Ba2/BB+) – tightened -3bp Wednesday.

Key Trading Indicator Economic Results – Wednesday:

• For the week ended December, total U.S. weekly rail traffic was 392,295 carloads and intermodal units, up 0.7% compared with the same week last year.

• Total carloads for the week ending December 27 were 188,673 carloads, +2.5% compared with the same week in 2024. U.S. weekly intermodal volume was 203,622 containers and trailers, - 1.0% compared to 2024.

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G-255 Systematic Model Update: Earnings Season Preview

January 2, 2026, Earnings Outlook

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

• G-255 credit trade indicators currently signals no additional risk in credit positions (neither new longs nor shorts) reporting within the next 30 days.

• G-255 Equity trade indicators are not explicitly timed to earnings dates but do incorporate information from released earnings reports.

• No non-US G-255 issuers (80 in total) will report before January 28, when Teva (TEVA Ba1/BB+ long credit/equity), Volvo (VLVY A2/A long credit/short equity), and LVMH (MCFP Aa3/AA- long credit/equity) are scheduled.

G-255 Balance Sheet and Operating Metrics

• 143 G-255 debt issuers added net debt to their balance sheets in the most recent reporting periods.

• 27 of the 242 G-255 equity issuers are showing year-over-year declines in operating cash flow.

Valuation Assessment

• USD G-255 credit is not yet at an overvalued extreme. For such a condition to emerge, G-255 TMT and broader credit spreads would need to tighten significantly further.

• USD G-255 equity is currently overvalued overall, but 55 issuers (23% of the universe and 25% of the 215 equity issuers with growing cash flow) are trading below their long indicator entry levels—presenting selective opportunities.

• Top Long/Short Trade Indicators (as of January 2, 2026)

Oracle (ORCL) equity remains a standout long trade. Last month's note: "As equity prices rise, the credit structure has an 87.5% probability of tightening (initially in the 5-year tenor) over the next 66 trading days. Model shows no increase in credit risk today vs. two years ago." Since then, ORCL 5Y bonds have tightened -15 bp. ORCL remains the top US technology name with a long equity indicator trading materially below attractive entry levels.

T-Mobile (TMUS) equity (long)

Meta (META) October 30 new issue: 4.6% 11/15/32 (+73 vs. 7Y)

Oracle (ORCL) 4.8% 09/26/32 (+147 vs. 7Y)

Oracle (ORCL) equity (long)

Broadcom (AVGO) 4.8% 02/15/36 (+78 vs. 10Y)

Highlighted Short Indicators

Short ORCL protection

Short Ford (F) equity

Short General Motors (GM) 3.6% 06/21/30 (+77 vs. 5Y)

Best Hedge: US IG CDX; ORCL equity put spread.

Oracle (ORCL), Broadcom (AVGO), and Meta (META) lead long credit indicators

No G-255 long credit issuer is deleveraging faster than Broadcom (A3/A-) (long credit and equity).

As of September 30, 2025, Meta held more cash than debt.

Broadcom bonds were issued a week after the most recent cyclical credit spread peak (per the G-255 model) on September 22.

Meta's October 30 deal followed its earnings release and disclosure of $30 billion in new lease obligations (treated as both assets and liabilities). These operating leases will have no material impact on Meta's long-term credit indicator.

Recent Performance Validation

• Over the past 6 weeks: META equity (ranked top long equity indicator) rallied +10%, with META 4.2% 11/15/30 tightening -4 bp.

• Over the past 3 weeks: ORCL (highlighted as attractive) saw ORCL 4.45% 09/26/30 tighten -14 bp and ORCL equity rise +9.2%.

• AVGO 4.2 10/15/30 have tightened by (-9bp) since our initial write up 5 weeks ago. AVGO equity is up 1% over the past 5 weeks. Hence the change in top indicator to the (AVGO) 4.8% 02/15/36 (+78 vs. 10Y)

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G-255 Credit Market Valuation and New G – 255 Supply January 2

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.

• Despite the U.S. Fed funds rate declining -75bp over the past 12 months, 10-year UST rates have fallen 39 bp YoY, while 5-year UST rates are down -64bp YoY. This muted decline in longer-duration UST rates has driven overall credit spreads wider in 2025.

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

ETF Flows (Week Ended Dec. 30, 2025)

• Net inflows to US-listed fixed-income ETFs totaled $9.73 billion (including leveraged funds), down 29% from $13.7 billion the prior week. This marked the end of 38 consecutive weeks of inflows.

• Broad bond-market ETFs saw inflows slow significantly, dropping $1.47 billion week-over-week to $4.53 billion.

• Corporate bond ETFs recorded modest net inflows of $298.4 million, a sharp decline of ~$1 billion from the previous week (reflecting the second-largest week-over-week change among categories).

  • Investment-grade corporate bond ETFs: Inflows fell $1.93 billion week-over-week to $6.41 billion.

    • Notable outflow: The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) experienced $1.026 billion in outflows.

  • High-yield corporate bond ETFs: Shifted to inflows of $110.6 million (total category inflows reaching $469.1 million), despite minor subcategory outflows of $76.4 million.

    • Notable: The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) saw outflows of $595 million on December 23.

Mutual Fund Flows (LSEG Lipper Data, Week Ended Dec. 24, 2025, vs. Prior Week)

• Short- and intermediate-term investment-grade bonds: $2.01 billion inflow (vs. $1.27 billion inflow prior week).

• High-yield notes: $1.08 billion outflow (vs. $1.26 billion inflow prior week).

  • This represented the first high-yield outflow since the week ending Nov. 19.

This summary highlights a late-2025 slowdown in fixed-income momentum, with investment-grade categories facing pressure while high-yield showed mixed signals across ETFs and mutual funds.

G-255 New-Issue Indicator Results

• On Wednesday, one additional G-255 new-issue bond from August or September reached its avoid trading level.

• Across all 2025 G-255 new issues, 91% of triggered indicators delivered an average return of just under -8 basis points over a 34-day holding period.

• Year-to-date, 1,002 of 1,101 G-255 USD bonds issued (totaling $1.147 trillion in notional) have hit avoid signals.

Why Sell G-255 New-Issue USD Bonds at Avoid Levels?

With 39% of all G-255 new-issue USD bonds now trading outside the model's avoid trading levels, these positions offer attractive returns over shorter holding periods.

• An average -8 basis points over 44 trading days equates to -48 basis points of annualized spread tightening—representing top-quartile performance, with no negative trading months and very high Sharpe ratios.

• The selection universe totals $1.2 trillion.

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G-255 Credit and Equity Market Indicators January 2

• Attractive Long Credit Indicators: 97, (-1 from Wednesday and -10% below the 200-day moving average of all long indicators).

• Attractive Long Credit Market Cap accounts for: 50% of all undervalued Systematic credit capital.

• Attractive Short Credit Indicators 1021, (+9 from Wednesday and +95% above the 200-day moving average of all model short trade indicators).

• Attractive Short Credit Market Cap accounts for: 67% 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 Wednesday with wider credit spreads and US equity prices lower.

US equities are unchanged over the past month; US credit spreads are 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 2

• Attractive Long G-255 Equity Trade Indicators: 55 (includes both undervalued and equities priced at

extreme discount (+3 from Wednesday and -8% below the 200-day moving average of all long-trade

indicators).

• Short Equity Trade Indicators +8, (Unchanged from Wednesday) and -18% to the 200-day moving

average of all model short trade indicators).

T dropped out of the highest ranked G -255 long equity list on Wednesday.

G -255 Issuer News Wednesday.

None

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G-255 Credit and Sector Indicators for "Long Only" trading strategies January 2

*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.