G-250 USD New Issue Supply Trading Model Summary from January 1- April 30, 2025
Good morning! We have already seen 16 large-cap corporate debt issuers report results this morning. UBS (UBS), Barclays (BACR), Credit AG (ACAFP), and Mercedes Benz Group (MBBGR) reported surprisingly strong results and balance sheet metrics. Santander (SANTAN) reported strong results and balance sheet movement similar to most Big 6 banks. While Volkswagen (VW), Total Energy (TTEFP) and Equinor (EQNR) disappointed.
We are also witnessing the capital formation outside the United States we have been writing about since the "tariff" speculation began. G-250 issuers LVMH, Swedbank (SWEDA), Nationwide (NWIDE), Visa (V) followed Alphabet(GOOGL) and Fiserv (FI) to the € Euro new issue market, while thus far we have yet to see a single large cap global borrower come to the USD market
37 of the world's top 250 corporate borrowers have reported results in the past 32 hours. 26 of those issuers had revenue growth lower than 4% and 30 of the 37 are adding net debt to pay for share repurchase and dividends. The headlines? "Trump Bashes Powell, Touts Tariffs at Rally Marking 100 Days." As of this morning the US risk markets are not paying attention to corporate earnings or outlooks. Lower Jolts Job opening numbers and Conference board sentiment readings are convincing US investors that a Fed rate cut (25bp) is coming in June and that will "heal all wounds." Hence equities and USTs were positive on Tuesday and US credit spreads were wider.
Earnings Season
20 of the world's 250 largest issuers of corporate debt reported results on Monday. Deutsche Bank (DB), HSBC (HSBC) and BBVA (BBVASM), AstraZeneca (AZN) were the only issuers reporting that showed net cash or a de-levering balance sheet
Of the 91 issuers that have reported results as of last night, Non-US issuers are raising debt at a slower pace (+1.5% QoQ) compared to US issuers (+3.7% QoQ) and that trend is continuing this AM.
Thus far, 22 of the of 76 US issuers reporting results are adding net debt.
Tuesday's US IG Credit Trading:
We saw more end-of-month trading, with volumes (+10%) higher than normal. The US IG CDX spread was actually (-.5bp) tighter to 67, and cash bonds were wider by (+1 - 3bp). Financials outperformed (owing to supply/demand metrics), while energy and healthcare were the worst performers owing to equity, not balance sheet performance.
How to trade Earnings Season
As we have watched almost 100 of the world's 250 largest issuers report results, we are seeing 3 trends:
US issuers are adding net debt faster than non–US issuers.
Non-US financial issuers are de-levering, and US Big 6 banks are re-levering.
Every Consumer issuer that has announced earnings has reported (9) a re-levering balance sheet. Industry revenue growth is less than 2% thus far. Consumer dividend payouts and share repurchases ($24 billion thus far) are 8% higher YoY and exceed net operating cash flow by about $9 billion.
Trading Strategy: The model trading output continues to Indicate:
Long Positions: Attractive bonds (or new supply) from issuers that have already reported results.
Short Positions: Issuer bonds trading within 20% of their 52-week tight spread, where the underlying company is re-levering its balance sheet.
Inflation Readings and Government Bonds
"Inflation is basically down and interest rates came down even though I have a Fed person who's not really doing a good job, but I won't say that… You're supposed to let him do his own thing, but I know much more than he does about interest rates, believe me." – President Trump on Tuesday.
The markets are buying it. UST 10Y yields are (-40bp) YTD.
U.S. IG Credit Valuation
US investment-grade (IG) credit continues to be the "most attractive" for long credit Indicators for the 31st consecutive trading day. See details in the Model output section below.
Equity Correlation to IG Credit Spreads
Tuesday was another indication of in certain trading sectors from the typical US IG 10Y credit spread correlation to US equity index price movement.
Consumer staple equity prices continue to lag the S&P 500. While our credit trading model sees the majority of the sector as overvalued. Over 140 bonds trade more 40% from spreads that would bring our model to consider most consumer bonds an attractive short indicators.
The same can be said for Big 6 banks. Just 6 of over 150 liquid bonds in that sector currently trade within (-12bp) of credit tightening where the trading model would produce attractive short trade indicators in that sector.
New Supply / Bond Maturities / Credit Fund outflows for April
No new US supply in the G-250 issuer group. However, new issue bonds indicated by our trading Alphabet (GOOGL), Philip Morris (PM) and Walmart (WMT) have outperformed
We have now seen over $100 billion of G—250 USD coupon payments and bond retirements. Normally, that would lead to a slight tightening of credit spreads, and that is exactly what we have seen. The majority of the retirements coming from Big 6 banks explains some of that sector's recent credit spread outperformance.
Systematic Trading Model Indicators – Wednesday
We saw US IG spreads widen a second day after the majority of the new issue calendar failed to trade well Monday or Tuesday this leaves at least (-12bp) of overall credit spread tightening before our model would begin to show significantly more attractive short trading indicators.
The model maintains its "long-only" stance across its 6,200-bond, 250-issuer USD large-cap universe for the 30th consecutive trading day. Attractive short indicators remain near five-year lows, with over 80% of model indicators classified as attractive long.
Attractive Trading Sectors
Attractive Long Trading Sectors: US Regional, UK, European and Canadian Banks are the most attractive long trading sectors this morning within the 6,200 USD bond universe analyzed daily by our model.
Attractive Short Trading Sectors: None. Consumer sector is re-levering. Consumer credit spreads are (+15bp) wide of attractive short trading levels
Systematic Credit Indicators
Our quantitative analysis and stochastic trading algorithms are the sole drivers of identifying trading opportunities. These strategies are backtested on historical data to assess performance, pinpoint weaknesses, and generate attractive long/short trades. The goal? Achieve a minimum of ±5 basis points of credit spread widening or tightening in as few trading days as possible, minimizing volatility risk while maximizing return on assets.
Most Recent Model Trading Indicators
Yesterday the credit trading model Philip Morris (A2/A-) PM Float 04/28/28 and the Alphabet(Aa2/AA) GOOGL 5 1/4 05/15/55 +62/30Y. The PM Float 04/28/28 reached its avoid trading level on Tuesday.
Tuesday Sample Trading Indicators Credit Spread Movement
Since February 24, we've published 27 secondary and new-issue trading indicators from our model:
• 12 indicators have reached their avoid-trading level.
• The remaining 15 indicators have widened by an average of +6.5 bp.
• Across all 27 indicators, credit spreads are -3bp.
Prior long/short trading indicators
Of the 46 new-issue and secondary trading indicators published (22 long and 24 short) that reached their avoid trading level, the average credit spread movement was (+/-5.6bp).
Of the 10 long indicators issued before February 22 that haven't yet hit the avoid-trading threshold:
• Four are BBB-rated and have widened by 27.5 bp on average since being indicated.
• They currently trade at 153 bp over the UST curve, with an 8.3-year duration.
• Our model projects an average spread tightening of -33.3 bp remaining.
• Six are single-A rated and have widened by +18.2 bp since indicated.
• They now trade at 110.5 bp over the UST curve, with a 10.9-year duration.
• The trading model indicates an average spread tightening of -23.1 bp remains.
Earnings results from yesterday and last night
Honeywell (HON, A2/A)
• 1Q Results: Honeywell "true (GAAP" Revenue and earnings were flat YoY in Q1 2025. But "adjusted" revenue and earnings were ahead of expectations. Meanwhile the company spinoff of its Aerospace unit will add value for shareholders. For bondholders? Not so much. Both S&P and Fitch have Honeywell credit on watch downgrade (taking the HON curve below a single A rating).
• Financial Position: Honeywell generated about $600mm of free cashflow and spent $2.6 billion on share repurchase and dividend payout, so the HON balance sheet is adding net debt and now has over $7 billion of short term debt, the most since 2019.
• Model Trading Recommendation: Our credit trading model now sees the Honeywell secondary trading curve as an attractive short trading recommendation at materially tighter (-20bp) trading levels.
American Tower (AMT, Baa3/BBB-)
• 1Q Results: American Tower (AMT) 1Q revenue fell (-10%) but operating earnings rose slightly YoY. Net earnings fell 50% primarily owing to foreign currency translation which aided 2024 1Q results and depressed 1Q 2025 earnings. FFO were strong growing almost 10% and management raised both 2Q and 2025 FFO guidance.
• Financial Position: The American Tower (AMT) balance sheet continues to de-lever YoY and the company dividend has not changed YOY. AMT was cashflow breakeven after dividend payment of $769mm in the quarter. Management is aware that American Tower's Baa3/BBB- credit rating needs to be preserved to continue to grow operations.
• Model Trading Recommendation: American Tower (AMT) only has 2 bonds outstanding with more than $Our credit trading model avoids the MO secondary trading curve but would participate in MO new supply if the opportunity presents itself.
Visa (V, Aa3/AA-)
• 2Q Results: Visa reported 8% YOY card growth and 9% revenue in it's 2Q f2026 while operating earnings (after litigation and foreign currency translation) we up about 2% YoY. The company conference call was enlightening. Similar to Prologis (PLD) if anything Visa (V) is a beneficiary of the US trade tariffs as they have invested to handle both crypto and stablecoin transactions.
• Financial Position: The Visa (V) balance sheet is losing excess cash to share repurchases and dividend payments. However, management does pay out more than operating cashflow and as such the V balance sheet has less net debt that it did 2 years ago.
• Model Trading Recommendation: Visa (V) has $4 billion of short – term debt. This morning's 4 part €3Y, 8Y, 12Y and 19Y bond offering should resolve that problem. The V 4.15 12/14/35 bond is considered the most attractive USD bond in the Visa secondary trading structure according to our credit trading model.
Kraft Heinz (KHC, Baa2/BBB)
• 1Q Results: Reported its sixth consecutive YoY revenue decline in 1Q 2025 while net income fell (-10%).
• Financial Position: KHC continues to repurchase equity and pay dividends in an amount that exceeds its cashflow from operations. Hence, the KHC balance sheet is again adding net debt.
• Model Trading Recommendation: Our credit trading model continues to see the KHC secondary trading curve as overvalued. The KHC 5.4 03/15/35 issued in February +87/10Y now trades +110/10Y. KHC bonds need (-20 to -25bp) to become an attractive short trading recommendation.
Mondelez (MDLZ, Baa1/BBB)
• 1Q Results: MDLZ had a rough first quarter with flat YoY revenue growth and a (-70%) drop in net income from commodity and foreign currency derivatives.
• Financial Position: Mondelez spent over $ 2 billion on share repurchase and dividends in 1Q 2025, twice as much as operating earnings during the quarter. The MDLZ balance sheet is again re-levering.
• Model Trading Recommendation: Our credit trading model sees the MDLZ secondary trading curve as overvalued and a potential attractive short trading recommendation at tighter (-10bp) credit spreads.
Starbucks (SBUX, Baa1/BBB+)
• 1Q Results: Starbucks reported flat 1Q YoY sales as the company added almost 1,300 new stores while existing comparable store sales fell in 1Q 2025 by (-2%). Net earnings fell by (-50%) in 1Q as a result.
• Financial Position: Starbucks Corp (SBUX) was roughly cashflow breakeven after capex and dividend expense in 1Q 2025. However, the Starbucks capital structure continues to add net debt.
• Model Trading Recommendation: Our credit trading model sees the Starbucks secondary trading curve as overvalued and a potential attractive short trading recommendation at tighter (-15 to -20bp) credit spreads.
Pfizer (PFE, A2/A)
• 1Q Results: Reported first quarter operating revenue that disappointed Wall Street.
• Pfizer does not report it's statement of financial position until it files it's 10-Q. The issuer was de-levering it's balance sheet for the quarter ended 12/31/24.
• Model Trading Recommendation: Our credit trading model continues to see the PFE secondary trading curve as an attractive long trading recommendation with 21 of the 23 PFE USD bond trading at attractive credit spreads. The PFE 4.4 05/15/44 is considered the most attractive with (-9bp) of projected spread tightening according to our trading model.
Tenet Healthcare (THC, B1/BB-)
• 1Q Results: Tenet reported first quarter 2025 operating earnings that pleased the equity markets and raised their 2025 earnings outlook. However the company did not change their cashflow projections for this year.
• THC has over the past years become more financially disciplined when it comes to their balance sheet. However, paying equity dividends when operating cashflow doesn't cover the amount of the payout leads to higher net debt and higher financial leverage. Such is the case for THC at the end of 1Q 2025.
• Model Trading Recommendation: Our credit trading model now sees the THC secondary trading curve as an attractive short trading recommendation at price levels less .5 to 1.5pts higher than current levels.
Entergy (ETR, A2/A First Mtg rating)
• 1Q Results: reported 1Q operating results with 4% revenue growth and very strong after tax earnings. Company backed its 2025 earnings guidance outlook.
• ETR is one of the few electric utility issuers mindful of its balance sheet in credit ratings at the holdco level (Baa2/BBB). While the ETR balance sheet is re-levering slightly at present, there are quarters where the Entergy debt structure is shrinking.
• Model Trading Recommendation: Our credit trading model now sees the ETR secondary trading curve as an attractive short trading recommendation at materially tighter (-10bp) trading levels but reminds that there are only 2 ETR issues that have over $900mm of market cap.
Enterprise Products Operating Partners (EPD, A3/A-)
• EPD reported 1Q cash flow and earnings that did not meet expectations. Nonetheless, it was a strong operating performance and management reiterated its $4 - $4.5 billion 2025 capex guidance as well as its commitment to the company dividend.
• Financial Position: EPD does not release balance data until they file their 10-Q in about 2 weeks. As of December 31, 2024 EPD was re-levering its balance sheet slowly.
•Model Trading Recommendation: Our credit trading model has seen the secondary EPD trading curve as a perennial attractive short trading recommendation at much tighter spread levels. The credit trading model also sees EPD equity (6.95% yield) as a long trading recommendation at current levels.
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.