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Fri, November 21, 2025

Systematic Credit and Equity G-255 Trade Indicators for November 21, 2025

"The stock market is a device for transferring money from the impatient to the patient" – Warren Buffett.

"Trees don't grow to the sky" – Edward "Ned" Johnson III.

I have been fortunate to meet the former a couple of times and to work for the latter for 8 years. What distinguishes business builders and great investors from the rest of the field is their ability to take the unorganized or complex and encapsulate it into a single thoughtful phrase.

Thursday's risk trading tried the patience of investors, traders, and observers post-Nvidia (NVDA long credit/equity) and Walmart (WMT short credit/long equity) earnings that initially soothed some market nerves until the adults voted with their wallets as the day went on.

However, as the day progressed it became more obvious via the lack of ETF and mutual fund inflow for both credit and equities that "end of the year" is upon us. Most "long-only" investment strategies have performed magnificently this year.

The best-performing fund managers don't "take chips off the table" at this time of year. If their numbers are strong, they sell everything they believe to be at risk going into December 31. There is also the small issue of capital gains taxes.

Smart People make the complex simple: Jeffery Vinik

We write frequently about the correlation between Large Cap equity movement and credit spreads. Since the correlation is a back-tested given, I often get asked about the quantitative background for the relationship. The answer is straightforward. The most efficient way to hedge a CDS contract is to employ equity put options on a delta basis and combine with overall CDX market risk.

Qualitatively speaking, however, 4 of every 5 credit analyst post-earnings write-ups for the world's largest corporate borrowers starts with "earnings beat!" And we have noted those headlines lead to credit spread movement that lasts 2–3 trading days.

Since I am playing the nostalgia card today, I was in the room with about 40 Fidelity analysts in 1992 when Jeff Vinik explained in simple terms "the only variable that matters when it comes to individual stock price movement is whether reported earnings beat analysts' expectations." And that was just as CNBC was going bankrupt. So I can safely say that it was Mr. Vinik who communicated the astute equity trading observation long before cable news was reporting it.

But Jeff wasn't done that day showing how smart people make the complex simple. "The most money to be made for decades is to buy technology" and he never wavered. Now my Boston office was one door away from his. And we did not always see eye to eye on all matters. But smart people make the complex simple.

Technology investments 2025

I have been noting the systematic trading model for the 255 largest corporate borrowers in the world has created trade indicators (1) shorting credit where issuers are using balance sheet to repatriate capital to shareholders, (2) getting long equity where issuers are using balance sheet to repatriate capital to shareholders.

This week the trading model added a wrinkle. Buy credit and equity of issuers that both have net cash and are repatriating capital to shareholders (META and Microsoft). As for the Single A technology sector overall – Jeff Vinik remains correct 33 years later. The cash-flow generation from these issuers is so strong, they return 60% of profits (growing 24% YoY) AND are de-levering their balance sheets.

G-255 Single A rated TMT (18) 3Q Sector Operating Data

G-255 Single A rated TMT (18) 3Q Sector Balance Sheet

G-255 Credit Trading Sector Indicators and Thursday Credit Trading

Investment grade mutual fund inflow declined for a second week and High Yield saw outflow for the third week in four. US G-255 credit is not inexpensive and neither are G-255 equities. There was no indicator change in the Systematic Trading Model trade allocation for either credit or equities overnight.

  • Top traded IG G – 255 issuer: Oracle (Baa2/BBB short credit/long equity) unchanged on Thursday

  • Top Traded HY G – 255 issuer: CCO Holdings (CHTR B1/BB- short credit) (+3 to +11bp) on Thursday

Key Systematic Trading Model Economic Indicators Reported Thursday:

  • November Philadelphia Fed Index rose to -1.7 from -12.8 in November

  • General business conditions were -12.8 in the prior month

  • New orders fell to -8.6 vs 18.2

  • Shipments fell to -8.7 vs 6.0

  • Six-month outlook rose to 49.6 vs 36.2

G-255 Credit Market Valuation and New G – 255 Supply November 21

On a Risk/Reward basis, High Yield bonds have far outperformed Investment Grade in 2025

  • UST 10-Year Rates: -35.7bp YoY and -50.2bp YTD.

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

In November 22 G -255 issuers came to market selling 66 bonds totaling $86.6 billion of USD debt. Wednesday led by Pfizer (PFE A1/AA) printing $6 billion of new bond in 6 different offerings. 5 issuers (Novartis NOVNVX Aa3/AA-) Alphabet (GOOG Aa3/AA-), Verizon (VZ Baa1/BBB+), Amazon (AMZN A1/AA-) and Pfizer (PFE A1/AA) accounted for 31 of the bonds and $55.5 billion of the market capital. Thus far, only the majority of the Amazon bonds have reached unattractive levels post new supply while the NOVNVX 4.6 11/05/35, NOVNVX 5.2 11/05/45, NOVNVX 5.3 11/05/55 all trade outside new issue spread.

We will review the July underperforming new supply in the next G-255 new supply report

Of the G-255 bonds issued through November 10, 2025 905 of 1054 (86%) reached their avoid trading levels.

Corp Bond ETF flows fell by -$589mm billion to just $218 mm in the week ending November 19, 2025

• Dedicated Investment Grade corporate bond ETFs had net outflow of -$355mm compared to -$203mm last week.

• Dedicated High Yield corporate ETFs have net outflow of $-1.411 billion compared to -$399mm last week

  • Government bond ETFs expanded by $262.7m to $4.29b

  • Mortgage-backed bond ETFs swung by $1.84b to outflows of $1.66b

  • IShares 7-10 Year Treasury Bond ETF had the biggest inflow, of $3.51b

  • IShares MBS ETF had the biggest outflow, of $1.8b

US mutual fund flows for the week ended Nov. 19, compared to a week earlier, according to LSEG Lipper shown below:

  • Short and intermediate investment-grade bonds: $806.9m inflow vs. $2.12b inflow

  • High-yield notes: $332.9m outflow vs. $366.5m outflow

  • Treasuries: $3.34b inflow vs. $4.22b inflow

  • US leveraged loans: $88.8m outflow vs. $387.6m inflow

  • Mortgage-related: $1.55b outflow vs. $188.6m inflow

G-255 Credit and Equity Market Indicators November 21

  • Attractive Long Credit Indicators: 91, (-3 from Thursday and -5.2% below the 200-day moving average of all long indicators). 22 long credit indicators are not included owing to the underlying equity price declines of more than -10% in the past 30 calendar days.

  • Attractive Long Credit Market Cap accounts for: 32% of all undervalued Systematic Credit capital.

  • Attractive Short Credit Indicators 413, (-54 from Thursday and -19% below the 200-day moving average of all model short trade indicators).

  • Attractive Short Credit Market Cap accounts for: 30% 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 for a sixth day. G – 255 issuer credit was wider Thursday primarily Big 6 banks.

  • US equities are roughly -2.95% lower WoW; US credit markets are slightly wider in the week ended November 20

  • US equities are -3.1% lower over the past month, US credit spreads are now materially wider MoM.

2025 is on track for the second-weakest year in 32 for USD credit-equity correlated movement—historic 80% vs. ~74% this year.

Systematic Equity Trading Indicators November 21

• Attractive Long G-255 Equity Trade Indicators: 76 (includes both undervalued and equities priced at

extreme discount (+8 from Thursday and +15% to the 200-day moving average of all long trade indicators).

  • The Increase in attractive equity came from the US Regional Bank Sector on Thursday

• Attractive Short Equity Trade Indicators 5, (-3 from Thursday and -30% below the 200-day moving

average of all model short trade indicators).

  • For G-255 issuers, equity prices of the world's most indebted companies were -1.7% Thursday and -2.68% over the past week, while the S&P 500 fell -1.56% Thursday and fell -2.95% over the past week.

  • Why are G-255 equity issues outperforming the S&P and Dow? A: Over 30% of the 242 publicly traded G -255 equities have already reached their 2025 low price.

G-255 Equity and Credit Indicators – How we use them

• G-255 issuers are the world's 255 largest issuers of corporate debt, as tracked and analyzed in

proprietary systematic credit trading model featured in the "Systematic Trading" Report on Substack and

universe represents the most heavily indebted and actively traded global companies.

  • G-255 refers to a standardized reporting framework used by USD bond issuers to disclose quarterly financial

results. It's not a regulatory mandate but a market convention tracked by systematic credit analysts and

traders. The exact list of 255 issuers isn't publicly detailed but aligns with globally indebted giants.

• Indicator calibration: Credit trading models use earnings data to recalibrate valuation indicators, such as

spread to-curve, earnings momentum, and debt ratios.

• Bond-level granularity: Many G-255 issuers have multiple bonds outstanding. Systematic models assess

relative value across the capital structure, flagging overvalued or undervalued bonds.

• Equity-credit linkage: For dual-listed issuers, equity signals (cashflow comparisons and returns to

shareholders influence credit spreads. G-255 disclosures synchronize these inputs

G-255 Specific Credit Sector Indicators November 21

Long Opportunities:

Focus on de-leveraging issuers, including Single A and BBB-rated TMT, BBB-rated Energy,

Euro Yankee Banks, and Floating Rate Notes.

  • Valuation Insight: The stochastic credit trading model identifies 247 undervalued bonds ($422.4 billion market

value), with 94 long trade indicators across the 6,000-bond USD universe.

  • At present only UK Banks, Single A rated TMT and US Regional Bank sectors have 10+ long individual bond trade indicators.

Short Opportunities

  • 1,459 bonds ($2.34 trillion) are overvalued per the stochastic credit trading model, with 413 short trade indicators.

  • U.S. Big 6 Banks (all ratings):No longer a short indicator as of October 22. Bonds +6 to +19.5 bp since 9/22.

  • Single A and BB Energy: No longer a short indicator as of October 27. Bonds +6 to +19 bp since 9/27.

  • Single A Healthcare: No longer a short indicator as of October 22. Bonds +5.5 to +16 bp since 9/22.

  • Single A Industrials: No longer a short indicator as of October 22. Bonds +6.5 to +20 bp since 9/22.

  • Autos: 152 bonds ($161.8 billion) are overvalued, with 79 short trade indicators

Systematic Portfolio Daily Trading Model Indicators

  • Long Indicators: Target deleveraging new issues with attractive valuations, focusing on 5-year maturities.

  • Short Indicators: 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.

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.

G-255 Specific Bond Trading Indicators November 21

  • Closed Positions: The Cigna (Baa1/A-) CI 2.4 03/15/30 (short) and Amazon (A1/AA) AMZN 4.35 03/20/33 (long) both reached their avoid trading levels Wednesday November 19.

  • Enter New Longs: 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 11/7. The new Amazon (A1/AA) AMZN 4.35 03/20/33 was added to the Model Trade on Monday.

  • Enter New Short Trades: 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 11/3. General Motors (Baa2/BBB) GM 3.6 06/21/30 was added as a short trade on Monday. The trading model added BP (A2/A) BPLN 4.893 09/11/33 as a short trade on Thursday

Current Sample Systematic Basket bond trades based on trading strategy November 21

Systematic Trading Indicators Thursday: The trading model added BP (A2/A) BPLN 4.893 09/11/33 as a short trade indicator

G-255 Credit Basket Trade Statistics

Thursday's Basket Trade Long/Short Ratio: 70%

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – November 20, 2025)

Performance Summary: Total Trades: 186 (1% of total trade indicators).

  • Long Indicators: 126/145 reached avoid-trading levels, tightening by -9.2 bp.

  • Short Indicators: 34/41 reached avoid-trading levels, widening by +5.71 bp.

  • Remaining Longs: 19 widened by +5.73 bp.

  • Remaining Shorts: 7 tightened by -9.59 bp.

  • Average Spread Movement: ± 6.33 bp in the recommended direction.

  • Success Rate: 86% of indicators reached avoid-trading levels, which is slightly below normal.

  • Average trade holding period: 22.8 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.