Systematic Credit and Equity G-250 Trading Summary with Trading Indicators for April 24, 2025
Good morning! Donald Trump's reversal on firing US Fed Chair Jerome Powell may signal a bullish case for US equities and debt. However, our stochastic, systematic approach to trading investment-grade (IG) and high-yield (HY) debt relies solely on our trading model's output, driven by publicly available data.
Eight large-cap issuers reported results on Wednesday, with summaries for three issuers not updated in real-time—Rogers Communications (RCICN), IBM (IBM), and Norfolk Southern (NSC)—combined with reports from European issuers ENI (ENIIM), Sanofi (SAN FP), and Orange (ORAF) this morning. These results highlight three key components shaping global capital markets.
First, a regional capital market apparatus influences where major issuers sell debt. Citigroup (C) has issued in euros, which is less costly than in the US, while non-US issuers have avoided the USD market post-earnings. Mitsubishi Financial (MUFG) issued in USD two weeks ago, before its earnings next month.
Second, the impact of potential tariffs remains negligible, but a cautious "wait and see" approach by corporate managers and investors is slowing the global economy, as evidenced by flat ISM and PMI data and the flat revenue and earnings outlooks from 44 issuers.
Finally, a "sea change" in capital market valuations—driven by credit spreads and P/E ratios—is tied to reduced capital flows and increased capital raising outside the US.
Will US equity markets return to all-time highs, or will credit markets revert to the 5–10 Year tight spreads seen in November 2024? Our quantitative approach avoids predictions. However, the significant financial leverage added to major corporate balance sheets, coupled with capital allocation to markets with greater certainty, suggests that historic high valuations in equity and credit markets will be challenging to achieve until these trends reverse.
Wednesday's US IG Credit Trading:
Credit markets opened stronger, with the IG CDX spread tightening by 3.1 bp to 69.1 and cash bond spreads tightening by 3 to 8 bp. US financials and BBB-rated TMT were the top-performing sectors, with no trading sector showing wider spreads on Wednesday.
New issues, including those from Mars, American Express, JPMorgan, and Goldman Sachs, outperformed secondary bonds, and front-end bonds saw stronger demand. Trading volumes were average, with more end-user selling of non-investment-grade bonds than investment-grade bonds.
Systematic Trading, Outflows, Earnings Reports, and Headline Risk
US mutual fund and ETF credit flows will be reported this afternoon. Only one new USD issuer came to market yesterday: Walmart (WMT), with a four-part $6.5 billion deal. Walmart typically accesses the USD market once annually.
In 2025, there have been 157 USD new issue transactions from 119 global borrowers, issuing 401 tranches totaling $288 billion. Financial institutions accounted for 69% of these deals. Year-to-date G-250 USD supply lags new issue volume by over 25%.
As to how to trade the current volatility?
Our trading model currently views US regional bank bonds as more attractive than those of the Big 6 banks. Following Wednesday and Thursday results, the secondary trading curves for ATT (T), ENI (ENIIM) Philip Morris (PM) secondary curves are the most attractive joining US banks Citigroup (C), State Street Corp (STT), American Express (AXP) and Capital One (COF) and Canadian Banks Toronto Dominion (TD) and Royal Bank of Canada (RY).
Issuer news on Wednesday
An Ohio jury ruled Wednesday that Norfolk Southern (NSC) must pay a $600 million settlement for the February 3, 2023, train derailment in Ohio. The jury found GATX not liable, despite a bearing failure on its railcar carrying plastic pellets causing the incident. Norfolk Southern, responsible for operating, inspecting, and safely delivering the cargo, bears the settlement cost.
BNP Paribas SA (BNP) Chief Financial Officer Lars Machenil noted that companies he works with are not rushing to draw on credit lines, suggesting a low risk of an economic cash crunch.
European car sales rose 2.8% in March, with electric vehicle deliveries surging 24%. Fully electric models accounted for 17% of sales, though Tesla's new registrations in Europe declined by 28%.
Inflation Readings and Government Bonds
Same-store sales, reflecting stores open at least one year, increased 7.4% for the week ending April 19 compared to the previous year, according to Johnson Redbook. Month-to-date sales through April 19 rose 7.0%. Growth above 5% typically signals price increases exceeding 3.5%.
Commentary on the US Treasury (UST) yield curve persists. Until the USD stabilizes and accurate inflation data for April and May are released, it remains challenging to predict where the UST curve will or should trade. Notably, USTs have been the top-performing government bonds globally in 2025.
U.S. IG Credit Valuation
US investment-grade (IG) credit continues to be the "most attractive" for long credit Indicators for the 27th consecutive trading day. Wednesday's spread tightening has resulted in tighter spreads for the week, though Bloomberg data suggests US IG credit spreads are approximately 4 to 6 bp tighter than the April 10 peak. Over 645 bonds ($1.1 trillion) remain classified as "Position long" or "Attractive long" for trading.
The trading model consistently identifies the front end of the USD corporate credit curve, particularly Floating Rate Notes, as the most appealing long credit opportunities within the systematic credit trading and research universe. We note a discrepancy with Bloomberg's assessment, but their data supports these findings.
Equity Correlation to IG Credit Spreads
Wednesday was the ninth trading day in 10, where US 10Y credit spreads correlated with US equity index price changes.
New Supply / Bond Maturities / Credit Fund outflows for April
New issuance continues to drive market activity. Walmart (WMT Aa2/AA) issued USD bonds for the first time in two years, offering a significant 6 to 10 bp concession at the 5- and 10-year maturities. Meanwhile, new issues from State Street Corp (STT Aa3/A) 5-year bullet and Kinder Morgan (BBB/Baa2) 5- and 10-year bonds outperformed in secondary trading on Wednesday.
New Supply Indicators
Systematic Trading Model Indicators – Thursday
Like Tuesday, Wednesday's US trading session had little impact on our systematic credit trading model. Credit spread movements were insufficient to alter attractive long indicators or expand the pool of attractive short trading opportunities.
The model maintains its "long-only" stance across its 6,200-bond, 250-issuer USD large-cap universe for the 27th consecutive trading day. Attractive short indicators remain near five-year lows, with over 80% of model indicators are classified as attractive long.
Attractive Trading Sectors
Attractive Long Trading Sectors: US Regional Banks 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: Only Big 6 banks (8 bonds) have more than five attractive short Indicators according to the model.
Most Recent Model Trading Indicators
The trading model added the State Street Corp (STT A3/A) STT 4.834 04/24/30 5-year bullet, with 7 bp of credit spread tightening. This bond reached its avoid trading level within one day.
On Wednesday, the model identified the new Walmart (Aa2/AA) WMT 4.35 04/28/30 and WMT 4.9 04/28/35 as the most attractive Indicator, each with 6 bp of credit spread tightening.
Thursday Sample Trading Indicators with Credit Spread Movement
Since February 24, we've published 24 secondary and new-issue trading indicators from our model:
• 8 indicators have reached their avoid-trading level.
• The remaining 16 indicators have widened by an average of 8.94 bp.
• Across all 24 indicators, spreads have widened by an average of 3.625 bp.
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).
Earnings results
Issuers reporting Wednesday (later) and this AM
Norfolk Southern (NSC Baa1/BBB+ ):
• 1Q Results: Flat operating earnings on lower volumes, adjusted for 2023 Ohio derailment; jury verdict ($600M settlement) will impact 2Q.
• Financials: Not retaining capital, but de-levering balance sheet.
• Trading Indicators: Long NSC secondary trading curve, with NSC 5.35 08/01/54 ($1B+ market cap) trading 10 bp from its attractive point.
Rogers Communications (RCICN Baa3/BBB-):
• 1Q Results: Slightly better YoY revenue/earnings, but disappointing subscriber growth.
• Financials: Adding financial leverage despite balance sheet improvement efforts.
• Trading Indicators show: Short RCI secondary trading curve at tighter credit spread levels.
ENI (ENIIM Baa1/A-):
• 1Q Results: Revenue and operating income well ahead of expectations; guidance confirms 1.7M bbl/day production, reduced capex, and focus on de-levering and dividends.
• Financials: De-levering balance sheet; cites trade headwinds from US rhetoric but not tariffs.
• Trading Indicators show: Long ENI USD secondary trading curve, with ENIIM 4 3/4 09/12/28 as the most attractive USD bond. ENI issues USD bonds every ~24 months.
Sanofi (SANFP A1/AA-):
• 1Q Results: Better than expected, affirmed 2025 guidance, filed to delist from Canadian equity/debt markets.
• Financials: Re-levering balance sheet; last USD bond issuance in 2018.
• Trading Indicators show: No specific indicators provided; re-levering suggests potential short or neutral stance.
IBM (IBM A3/A-):
• 1Q Results: Revenue and operating income were ahead of expectations; Management guided lower not due to trade tariffs, but do the impact of the DOGE initiatives on consulting revenue going forward.
• Financials: Re-levering balance sheet post $6.5 HashCorp acquisition in February 2025. Company is not retaining capital.
• Our trading model views the IBM secondary trading curve as an attractive short trading indicator at tighter levels.
Issuer still to report on Thursday
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 any 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.