G-255 Specific Credit Sector Indicators January 27 – Long Only Indicators on Page 8

G-255 Overview: What It Is

G-255 tracks the world's 255 largest corporate issuers, each with ≥$15 billion in liquid tradable debt. It covers ~6,000 USD bonds (avg. $1.16B per bond) and 242 publicly listed equities (combined market cap ~$47 trillion—60% larger per issuer than S&P 500 average), with 80 equities non-U.S. domiciled.

Long Opportunities

Credit: Focus on de-leveraging issuers — Single A/BB TMT, Single A Healthcare, UK/US/Canadian Banks, Floating Rate Notes (190 undervalued bonds worth $361 B; 106 long indicators).

Equity: Focus YoY operating cash flow growth — TMT, Healthcare, US Utilities (40 undervalued equities worth $11.81T).

Short Opportunities

· Credit: 1,585 overvalued bonds ($2.75T market value; 1,273 short indicators) Big 6 banks remain the largest overvalued sector (302 overvalued bonds. $727 billion of market value, 262 short indicators.

· Equity: 15 overvalued issuers ($1.53T; 8 short indicators).

This quantitative, rule-based framework provides unified, objective signals for global corporate capital structure

extremes.

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 was added, and three long trades reached their avoid trading level. The trading model did not add any long 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 50% long hurdle, initiate short positions in releveraging issuers (focusing on 5-year maturities) at a 1:1 ratio for additional long positions.

· Review: Reassess portfolio balance after weekly 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 27

· Closed Positions: 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. On Tuesday 1/20/26 Royal Bank of Canada (A1/A) RY 4.305 11/03/31 reached its avoid trading level. On Wednesday 1/21/26 Mitsubishi Finance (A1/A-) MUFG Float 09/12/31 and ATT (Baa2/BBB) T 4.55 11/01/32 both reached their avoid trading levels.

· 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.

New Credit Trade Indicators Monday : None

Current Sample Systematic Basket Credit/Equity trades based on trading strategy January 23

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – January 26, 2026)

· Total Trades: 195 (full year 2025); 25 (2026 YTD)

· Long Indicators (2025): 136 out of 150 tightened by an average of -9.2 bp. In 2026: 8 out of 15 tightened by an average of -6.53 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. (2026): 7 positions tightened by -1.27 bp.

· Remaining Shorts (2025): 9 positions tightened by -19.23 bp. (2026): 10 positions tightened by -2.47 bp.

· Average Spread Movement (2025): ±6.73 bp in the indicated direction. (2026): ±1.46 bp.

· Success Rate (2025): 88.2% of indicators reached avoid-trading levels (slightly below historical norms).

· Average Trade Holding Period (2025): 23.7 days (above average).

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Systematic Portfolio Daily Equity Trading Model Indicators

· Long Indicators: Target G-255 issuers with positive year-on-year cash flow and returns to shareholders, trading more than 5% below their historic price moving averages. Focus on issuers with the largest returns to shareholders.

· Short Indicators: Target G-255 issuers with negative year-on-year cash flow and returns to shareholders, trading more than 7.5% above their historic price moving averages. Focus on issuers with the largest declines in operating cash flow.

· Allow trading levels for all 242 equities to determine the number of positions: G-255 is not a "stock picking" tool—it is a stochastic measurement system based on current operating metrics and returns to shareholders.

· Current Status of Trading Indicators: Last week, one short trade was added, and 2 issuers dropped off the "most attractive long" indicators list.

· Monitor Trade Position Composition

· If replacing long positions that have reached their avoid-trading level pushes the portfolio above the 65%/35% long hurdle, shrink position size to remain at model indicator trade position levels.

· When short positions reach their avoid point, rely on the overall position indicator for trade size. Only position short equity positions that meet G-255 model criteria.

G-255 Specific Equity Trading Indicators January 27

· Closed Long Positions: Home Depot reached its avoid trading level on Tuesday 1/20/26. Altria reached its avoid trading level on Monday 1/26/26

· Open Long Positions: since January 5, the G-255 has added and (subtracted) 16 issuers from the most attractive long indicator list DELL, 6-Jan ATT, 8-Jan, Kraft Heinz, American Tower, Crown Castle, Kroger, 14-Jan Softbank, AIG, 15-Jan Paramount Skydance, Meta Platforms, 16-Jan, Sanofi, Microsoft, Fidelity National Serv, HPE and Qualcomm

· Open Short Positions: Since January 5 the G-255 has added one short position UAL on 1/20/26

Definitions:

· A G-255 "Highest rated" equity long must be trading -7.5% relative to its historic moving average.

· A G-255 "Highest rated" equity short must be trading +7.5% relative to its historic moving average.

Overall, the 30 highest-rated G-255 long positions have returned +0.65% in January.

Overall, the 7 highest-rated G-255 short positions have returned -0.29% in January.

G-255 Trade Sizes and Systematic Trade Process for Debt and Equities

· 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 6,022 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 equities and bonds.

· The system accommodates the largest institutional trade sizes, dependent on user resources and trading relationships (all G-255 USD corporate bonds trade OTC via over 80 dealers and all 5 major U.S. 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% of daily NASD TRACE trades (95% of USD investment-grade and 48% of USD non-investment-grade).

G-255 Trade Indicators are created daily for all 6,250 debt and equity securities.

· Indicator Calibration: The stochastic credit trading model uses earnings data to recalibrate balance sheet leverage and valuation indicators, 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 (~$27.5 billion USD debt cap per issuer). The model analyzes historical relative value across the capital structure, generating indicators for over/undervalued bonds.

· Equity-Credit Linkage: For issuers with both equity and bonds, equity signals (driven by cash flow and shareholder returns) directly influence credit spreads. The framework integrates these to produce synchronized long/short signals based on liquidity thresholds.

Equity and Credit Trading and Sector Indicators and Monday Trading

Monday, January 26, 2026, To paraphrase a former U.S. Federal Reserve Chairman, "irrational exuberance" reigned in equity trading on Monday, while "sobriety" described credit trading. For only the third time in 2025, G-255 equities and corporate bond spreads did not move directionally in tandem.

Despite the University of Michigan consumer sentiment survey confirming a poor and ongoing U.S. consumer spending environment, markets ignored it. Headlines shifted from Japanese Yen and inflation concerns (4% JGB 10Y yield and rising government deficit spending) in the morning to "problem solved" by afternoon. U.S. equities rose even without a dip to buy.

G-255 equities are now fully overvalued, with only 40 of 242 issuers trading below attractive long entry levels. Post-close, G-255 credit short indicators dipped below 1,300 but remain overvalued.

Key Trading Indicator Economic Results – Monday:

· New Durable orders ex-trans. rose 0.5% in November after 0.1% in October

· Non-defense capital goods orders ex-aircraft rose 0.7% vs +0.3% in October

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G-255 Systematic Model Update: January 27 Trading and Earnings Reports

Buy the Dip even when there is no Dip.

Stocks Close In on New Highs as Tech Leads Charge: Markets Wrap"

· Investors look to earnings to support a three-year bull run that has broadened recently, after big tech drove earlier gains.

· Goldman Sachs CEO David Solomon: "Economically, things set up nicely," citing stimulative fiscal policy and massive AI investment (Bloomberg).

Well, that's good enough for me. I'm all in.

Unfortunately, the G-255 trading model disagrees. Both equity and credit indicators are now at highly overvalued

levels. We've seen this before: February 2025, December 2021, February 2020, September 2018, October 2016—times

when both models were significantly overvalued. However, current equity prices and credit spreads are not as

extended as on those dates (yet).

One note on market pullbacks: Very few (4 by my count over the past 30 years) begin during earnings season.

G-255 Credit Market Valuation and New G – 255 Supply January 27, 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 Monday, February 21, 2025, and widest on Tuesday, April 10, 2025.

· YOY change in the UST 5Y: -51.4 bp.

· YOY change in the UST 10Y: -31.3 bp.

We are no longer 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.

On Monday, four major issuers brought $8.1 billion of new USD bonds to market: 1 insurance issuer, 1 Regional U.S. Bank, 1 Big 6 Bank, and Saudi Aramco.

Year-to-date 2026 G-255 new USD supply now stands at $147.9 billion, roughly +4% ahead of the final January 2025 total.

The most notable surprises were:

Goldman Sachs Subordinated 15nc10 – priced very generously according to the G-255 systematic model.

Saudi Aramco 3-year and 5-year – came extraordinarily tight (–35 bp from initial price talk), especially surprising given Aramco's historically poor liquidity and the fact that this was already its third USD transaction ($15 billion total) in just seven months.

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G-255 Model View on Goldman Sachs Subordinated 15nc10 Prior to pricing, the G-255 model viewed the new GS

subordinated bond as attractive down to 109 / 10y. It currently assigns a 94% probability that the bond will trade to

107 / 10y (from current 118 / 10y) over the next two months.

The expected 44-day tightening horizon reflects the fact that Goldman Sachs is currently in a re-levering phase.

Historical Precedent – GS 11nc10 Senior Holdco (5.065% 01/21/37) This bond was initially priced at 90 / 10y,

tightened as much as 81.5 / 10y and has been backing out ever since. The G-255 model's initial indicator flagged it as

attractive to 87 / 10y to achieve –5 bp of spread tightening – which is exactly what occurred.

G-255 New Issue Trading Objective The model's primary goal for new issue indicators is to identify opportunities that

deliver at least –5 bp of credit spread tightening within: • 22 trading days for de-levering issuers • 44 trading days for

re-levering issuers

Model Performance & Selectivity

· The G-255 systematic model generates long indicators for only ~12% of new issues (which represent ~67% of total annual USD new debt capital).

· When bonds are held until they reach their avoid-trading level, the model has historically been successful 97% of the time.

January 2026 New Issue Statistics

· 52 G-255 issuers came to market in USD during January 2025

· Total of 154 bonds issued

· 92 of those bonds have already reached their avoid-trading level according to the G-255 credit model

Broader New Issue Performance (All 2025 G-255 Issues)

· 95% of avoid-trade indicators delivered an average return of just under –8 bp over a 34-day average holding period

· Over the past 12 months, 1,055 of 1,100 G-255 USD bonds issued (totaling $1.147 trillion notional) have reached 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 27

· Attractive Long Credit Indicators: 106 (+14 from Monday) and 5 % above the 200-day moving average of all long indicators.

· Attractive Long Credit Market Cap accounts for: 53% of all undervalued Systematic credit capital.

· Attractive Short Credit Indicators 1,272 (-39 from Monday and +133% above the 200-day moving average of all model short trade indicators). Short Credit Market Cap comprises 81% 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 12 of the first 15 trading days of 2026.

US equities are +.7% over the past month; US credit spreads are now materially tighter MOM

Systematic Equity Trading Indicators January 27

• Attractive Long G-255 Equity Trade Indicators: 40 (includes both undervalued and equities priced at extreme discount) -11 from Monday and -33% below the 200-day moving average of all long-trade indicators.

• Short Equity Trade Indicators -8, (-3 from Monday) and the -27% to the 200-day moving average of all model short trade indicators).

G-255 Key Differentiator

It uses a purely systematic, stochastic absolute value model with zero human input: signals derive solely from each issuer's own 52-week public pricing history (plus earnings and balance sheet/leverage data). No peer comparisons, forecasts, macro factors, or sentiment analysis. This issuer-isolated approach detects extreme trading levels vs. each name's historic norms, covering ~85% of daily TRACE-reported USD corporate bond trades (95% IG, 48% HY). Back-tested tracking accuracy: 97.5%.

Cross-Asset Integration

The automated model links equity (growth, volatility, momentum) and bond (credit spreads, debt dynamics) data from each issuer's history, spotting divergences (e.g., equity momentum vs. spread moves) to generate objective long/short indicators across both asset classes.

G-255 Credit and Sector Indicators for "Long Only" trading strategies January 27

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.