Systematic Credit and Equity G-250 Trade Indicators for June 4, 2025
Credit Spreads, Equity Valuations, and Corporate Debt Trends
The show rolls on! "Wall Street buzzed with optimism overnight, fueled by strong US job data and amplified in Asia by Korea's post-election clarity, keeping investors firmly risk-on. US job openings climbed unexpectedly to 7.39 million in April, led by private-sector gains in professional/business services and healthcare/social assistance. Hiring hit a near one-year high, despite fewer openings in manufacturing and leisure/hospitality." US risk markets ate it up.
However, April's JOLTS data marked the third-lowest reading since March 2021. Initial jobless claims through
May 23 are up +19k YoY and +6.2% MoM. Continuing claims averaged 1.89 million, the highest since 2018 (excluding April 2020–November 2021 COVID data).
ADP private payroll data for May drops later today, with Challenger, Gray & Christmas weighing in on private employment tomorrow.
US credit spreads are drifting—tighter for some ratings, wider for others—edging toward overvalued but still only modestly so this morning.
On June 4, 2025, our credit trading model indicated 76% allocation to long/short positions, with the rest in long indicators for bonds with 2-year or shorter maturities (positive carry).
Does our strategy beat market returns? It did in May. The model is built to: (1) profit on 95% of trade indicators, (2) outperform significantly during extreme volatility (spreads near 52-week tights or wides), and (3) slightly lag when volatility is low and falling. This delivers strong returns with minimal losses over any period.
Our model generates indicators across 6,200 bonds ($6.5 trillion USD market cap) in five flavors: Attractive Long, Attractive Short, Position Long, Position Short, and Avoid. Two to four times every 12 months, the model hits an extreme (two in 2024, one in 2025 so far), signaling a 75% capital allocation in one direction with clear entry/exit points for attractive bonds.
Daily, the model evaluates the overall credit market, sectors, issuers, and individual bonds, targeting ±5 bp of value (±1.5% for HY) in minimal time to reduce exposure to low market volatility. This ensures positive returns in all conditions—tightening, widening, rising, or falling interest rates.
When to short USD credit? "Not yet, Billy Ray!" (Cue Trading Places.) This morning, the model flags 352 attractive short indicators ($540 billion), 24% below normal, and 68 attractive long indicators ($93 billion) plus 183 bonds from issuers reducing leverage ($279 billion), 32% below normal. If trends hold, long indicators will outperform shorts, per the model regardless of the ratio of short/long indicators.
Inflation, Economic Data, and Interest Rate Outlook
US Census Bureau data shows April factory orders fell 3.7% (vs. -3.2% est.):
New orders ex-transportation: -0.5% (after -0.5% in March).
Durable goods orders: -6.3% (after +7.6%).
Capital goods (non-defense, ex-aircraft): -1.5% (after +0.3%).
Consumer goods shipments: -1.7% (after -0.3%).
Consumer goods new orders: -1.6% (after -0.4%).
Johnson Redbook reported a 4.9% rise in same-store sales for the May 31 week YoY. Some retailers raised prices due to tariffs, while others cut profit outlooks or withdrew full-year guidance.
Does the model look at this data? Only the Redbook, Rail Traffic and Jobless claims. Why? None of that data is provided by the Federal government and all of the indicators are coincident with US actual economic activity.
Earnings Season Insights
Hewlett Packard Enterprise (HPE) reported last night, slashing revenue guidance but raising "adjusted earnings" guidance for 2025 after a $1 billion Q2 net loss from goodwill write-offs. We don't judge earnings, but HPE's report wasn't stellar (see page 5).
The world's largest corporate borrowers added $137 billion in net debt this reporting period and $1.2 trillion YoY. Segment-level balance sheet data raises concerns:
The world's largest issuers of corporate debt have $11 trillion of liquidity vs. $17.2 trillion of debt. Not really.
41 non – US banks have $7 trillion of liquidity against $7.16 trillion of debt and almost $21 trillion of deposits.
Which means the remaining 191 largest issuers of corporate debt (including the US banks) have $4 trillion of liquidity against $10 trillion and that number is moving the wrong direction, quickly.
In case you missed it, "Due to tariffs, some retailers have selectively increased prices on their products. A few retailers have lowered their profit outlooks and withdrawn their full-year guidance."
Tuesday's US Investment-Grade (IG) Credit Trading
Tuesday's trading volume was -4% below average.
G-254 issuers dominated, accounting for 85 of the top 100 traded bonds last week, representing 93% of top 100 issuer trading volume and 68% of total TRACE volume.
Market Movement
U.S. CDX Index: unchanged at 55 basis points.
U.S. IG Cash Spreads: unchanged to (-4bp) tighter Tuesday.
Sector Performance: Energy and consumer were the best performing sectors on Tuesday.
Dealers bought over $1 billion in HY bonds, including EchoStar (SATS), which pressured new supply from AT&T (T), T-Mobile (TMUS), and Oracle (ORCL). Dealers were net neutral on IG bonds. Our model flags attractive short indicators for SATS, TMUS, and ORCL, but not T.
Top dealer-bought new supply: GE Healthcare (non-G-254) and Bank of New York (BK).
Dealers sold most paper from Citigroup (C, attractive long), CVS (CVS, attractive long), and UnitedHealthcare (UNH, attractive short).
Attractive trading sectors
Long Opportunities
None – there are only 251 bonds considered undervalued ($372 billion) and 68 considered attractive long trading indicators ($93 billion) by our trading model
Short Opportunities
U.S. Big 6 Banks (All Ratings): $597.2 billion in overvalued market capital across 229 bonds, with 56 short indicators.
Energy (All Ratings) : $186 billion in overvalued market capital across 131 bonds, with 64 short indicators.
BBB TMT: $193.8 billion in overvalued market capital across 111 bonds, with 39 short indicators.
Single A Healthcare: $113.6 billion in overvalued market capital across 79 bonds, with 24 short indicators.
Issuer News
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Wells Fargo & Co. (WFC): Freed from a Federal Reserve asset cap after over seven years, enabling deliberate growth and enhanced returns.
EchoStar (SATS): Skipped another interest payment ($183 million for Dish DBS) pending FCC review, following a missed $326 million spectrum-related payment.
U.S. IG Credit Valuation and Spreads
OK, Bloomberg adds new supply to its index in a more or less unorganized and non – mathematical manner which leads to some bizarre spread readings.
Our trading model, leveraging stochastic finite mathematics with over 95% probability outcomes, suggests U.S. investment-grade (IG) credit is approaching "Overvalued" This morning as recent new issue trades from Walmart (WMT), Apple (AAPL), and Citibank (C) moved in spread on Tuesday.
Global Equity Correlation to IG Credit Spreads
For the 27th day in 30, U.S. IG credit spreads showed modest correlation with the S&P 500 closing price on Tuesday. Why does credit underperform equity? One of several reasons: 31% of S&P 500 market cap is technology, but only 8% of top global issuer debt comes from tech 8% of the top issuer debt in the world comes from technology companies.
New Supply / Bond Maturities / Credit Fund outflows for June
June is expected to see above-average new bond supply. Tuesday's new USD deals were as uninspiring as Monday's none of the fixed rate transactions were close to $1 billion in market capitalization.
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None of Tuesday's new bond supply qualified for the publishing segment of our trading model. While both the National Australia Bank (NAB) and Bank of New York (BK) FRNs are attractive, the Mercedes Benz Group (MBBGR) and ING (INTNED) FRNs already listed in the published indicators are far more attractive at current levels according to our trading model.
In Europe, 5 G-254 issuers sold €5.5 billion in new supply on Tuesday.
Systematic Trading Model Indicators and Trading Strategy - Tuesday
This morning's model output:
352 attractive short indicators, +68 from Tuesday morning.
68 attractive long indicators, - 6 from Tuesday.
Of over 6,000 bonds in our research universe, 420 are trading near their 52-week tight or wide spread levels—24% below normal and 19% below the threshold for initiating short positions.
Systematic Trading Strategy for Tuesday June 3
Strategy: Prioritize long positions in de-levering new issues with compelling valuations. Hold off on short positions until short indicators reach 400 and credit spreads enter the "overvalued" range.
Systematic Credit Indicators
Systematic credit trading Our model uses predefined, back-tested processes driven by issuer data and market parameters, targeting ±5 basis points of spread movement in minimal trading days while managing volatility risk.
Most Recent Model Trading Indicators
Citibank (C, Aa3/A+) C 4.914 5/29/30 banknote reached its avoid-trading level on Tuesday.
Union Pacific (UNP, A3/A-) UNP 5.6 12/1/54 is 1 of 10 new issue model indicators published prior to February 23, 2025 that has not reached its avoid trading level.
Sample Trade Performance Since January 4, 2025 (110 trades, 1% of Total Indicators):
62/83 long indicators reached avoid-trading levels, tightening by -10.46 bp.
24/27 short indicators reached avoid-trading levels, widening by +5.3 bp.
21 remaining longs widened by +1.33 bp.
3 remaining shorts tightened by -6.66 bp.
Average spread movement: ±6.79 bp in the indicated direction.
78% of indicators reached avoid-trading levels (12% below normal).
Since May 15, 11 long indicators hit avoid-trading levels, contributing -1.4bp of overall spread tightening to the 61 long trades. Overall performance of all trades has improved from +/- 4.91 bp to +/- 6.66 on 110 sample trades.
Issuers reporting Tuesday:
Hewlett Packard Enterprises (HPE, Baa2/BBB)
Q2 Results Revenue reached $8.74 billion (+6% YoY), but operating income was (-$1.1 billion). Excluding a -$1.3 billion goodwill writedown, operating earnings still fell (-45%). While HPE's AI revenue base grew, other segments showed no improvement. Third-quarter revenue guidance of $8.2–$8.5 billion falls short of estimates at $8.85 billion—not an optimistic outlook.
Financial Position Net debt continues to climb, though down (-$2.7 billion) YoY. HPE remains cash flow negative. The company boosted its dividend and share repurchase program by 21% in the first half of fiscal 2025.
Model Trading Indicators: Of 13 liquid USD HPE secondary bonds, 4 are undervalued, with 2 attractive long Indicators (2025 and 2026 maturities). The HPE 4.85 10/15/31 is undervalued per the trading model but not an attractive long. HPE equity is not considered an attractive long at last night's closing price.
Today's new G -254 new supply
G–250 USD New Issue Supply and Trade Indicators.
Bank of New York Mellon Corp ( BK, Aa3/A)
$ 3NC2 FRN IPT SOFR Equiv
$ 3NC2 Fxd-to-FRN IPT +75 Area – Model sees attractive to 47/3Y
$ 11NC10 Fxd-to-FRN IPT +110 Area - Model sees attractive 80/10Y
Issuer has more cash than debt
National Australia Bank Ltd/New York (NAB, Aa2/AA-)
$ 3Y FRN IPT SOFR Equiv
$ 3Y IPT +65 Area – Model sees attractive to 38/3Y
$ 5Y IPT +78 Area – Model sees attractive to 44/5Y
Issuer is re-levering, but the offering is a Sr. Banknote
G-254 Euro New Issue Supply and Trade Indicators.
Philip Morris International Inc (PM, A2/A-)
€500m 4Y Fixed @ MS+80
€500m 7Y Fixed @ MS+108
Issuer is de-levering
Volvo Car AB (VOVCAB, Ba1/BB+)
€500m WNG 4Y Green Fixed to Yield 4.2%
Issuer is re-levering
Stellantis NV (STLA, Baa2/BBB)
€700m 7Y Fixed @ MS+170
€800m 10Y Fixed @ MS+215
Issuer is de-levering
Nordea Bank Abp (NDAFH Aa3, AA-)
NOK2b 3Y FRN @ 3mN+74
NOK1.25b 5Y FRN @ 3mN+
Issuer is re-levering
UniCredit SpA (UCGIM, Baa1/BBB+)
€1b 6NC5 Fxd-to-FRN (June 10, 2031) at MS+95
€1b 10Y Fixed (June 10, 2035) at MS+125
Issuer is de-levering
Other inquiries on Tuesday: Textron (TXT, Baa2/BBB), Pacific Gas & Electric (PCG, Baa1/BBB), Royal Bank of Canada (RY, A1/A) and EchoStar Corp (SATS Caa1/B 1st lien).
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.