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Mon, November 10, 2025

Systematic Credit and Equity G-255 Trading Indicators Post Earnings for November 10, 2025

Good morning. Friday's USD risk trading was prepping for a Tuesday Veterans Day holiday, and we saw the US SPX fall by -75pts midday only to rally to close slightly higher as no one wanted to go home short going into what will be a muted Monday trading day. Friday credit trading volumes were -20% below normal with US regional banks the most bought credit. I seem to remember mentioning Regional Banks a bit on Friday. Correlation between the G-255 equities and G-255 bonds was much stronger than for the overall equity and credit markets Friday.

This morning, however, the end of the US Government shutdown is apparent; the impact will most likely lead to higher healthcare costs for the majority of American citizens balanced by perhaps a more balanced US budget. As to whether US Government jobs return is another question.

Quantitatively speaking, Government spending and job cuts have an 85% chance of leading to at least one quarter of negative GDP growth going back to the days of Woodrow Wilson (1912–1920 for those of you keeping score).

Systematic Trading Indicators post earnings.

We are playing a bit of catch up with the earnings digest. Not because we don't have the info. More due to how much can anyone read in a single day. Today's earnings digest handles the TMT communications issuers that have been most traded recently. We have written repeatedly about the lack of unit volume growth in 3Q or September results. Overall subscriber growth in the communications issuers is going to be less than 1.5% YoY for the quarter, and that has sent both the equity and large TMT communications corporate issuer bonds reeling. Those that will report earnings in this quarter have provided numbers. Only T-Mobile of all 10 global communications issuers in the G-255 issuer group showed more than 2% subscriber growth in both wireless and broadband subscribers in the past quarter. Credit Spreads are out +5 to +15 bp while communications equity prices are down on average -16% since 3Q results were reported and -28% since 2Q results were reported.

This has left Communication equities undervalued and 8 of the 10 G-255 communication issuer equities ($1.4 trillion) as long trade indicators. 29 of the communications bonds (A–BB rated) have long indicators totaling $42 billion.

We hit a six-month high in G-255 US IG/HY long trade indicators over the weekend and hit a 5-month low in G-255 US IG/HY short trade indicators over the weekend.

While both equity and corporate bond valuations for the world's 255 largest corporate debt issuers fell Friday, G-255 equities remain slightly undervalued and G-255 bonds near fair value per our systematic trading model. Still, insufficient long trade indicators in G-255 corporate bonds to shift the model's daily trade allocation.

Top Short-Indicated Credit Sector: Top Short – Indicated Equity Sector

BBB Autos (All currencies) Autos ( All ratings - all currencies)

Top Long-Indicated Credit Sectors: Top Long – Indicated Equity Sectors

US Regional Banks (USD) Consumer (all currencies)

UK Banks (all currencies) US Regional Banks (USD)

U.S. BBB TMT (all currencies) BBB TMT (all currencies)

Trading Allocation Strategy Credit:

47.5% Long: Undervalued, deleveraging bonds.

32.5% Short: Overvalued bonds in releveraging sectors.

20% Front-End: 75% in floating-rate notes (<3 years).

Risk Management:

The model avoids adding risk to G-255 issuers reporting within 30 days due to global regulatory requirements for material event disclosures.

Material Economic Indicators Reported Friday:

  • University of Michigan sentiment survey prelim November fell to 50.2 a 2 ½ low.

  • 1 Yr forward inflation expectations rose slightly to 4.7% while 5Y expectations fell from 3.9% in Oct to 3.6%.

Credit Trading Friday

Investment-Grade (IG) Trading

  • Volume: -16 % below average

  • G-255 Issuers: 98 of the top 100 traded issuer bonds accounted for 96% of top 100 issuer volume and 94% of total TRACE volume.

High-Yield (HY) Trading

  • Volume: -20% below average.

  • G-255 Issuers: 7 of the top 25 traded bonds accounted for 33% of top 25 issuer volume and 35% of total TRACE volume.

Friday Credit Market Movement

  • US CDX Index: unchanged at 49.4 bp (includes -4 bp of forward roll)

  • US IG Cash Spreads: (+1 to +3 bp) wider with Communications bonds.

  • CDX HY Index: +0.1 bp at 107.1 (per Bloomberg)

  • HY Cash Bonds were wider Friday, with Technology and Communications underperforming.

High-Yield Activity

• Dealers bought $900mm of high yield bonds on Friday.

  • Most Bought HY Bonds: Transdigm (TDG Ba3/BB- attractive short)

  • Most Sold HY Bonds: Celanese (CE Ba1/BB+ attractive short )

Investment Grade Activity

  • Dealers sold $ 750 million of IG bonds on Friday.

  • Most Bought Sector: US Regional Banks

American Express (AXP A2/A- attractive long)

Bank of New York (BK Aa3/a attractive long)

  • Most Sold Sector: Single A TMT

Comcast (CMCSA A3/A- attractive long)

NTT (NTT A3/A- attractive short)

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 244 undervalued bonds ($407.6 billion market value), with 92 long trade indicators across the 6,000-bond USD universe.

Short Opportunities

  • 1,456 bonds ($2.27 trillion) are overvalued per the stochastic credit trading model, with 461 short trade indicators.

  • U.S. Big 6 Banks (all ratings):No longer a short indicator as of October 22. Bonds +5 to +17.5 bp since 9/22.

  • Single A and BB Energy: No longer a short indicator as of October 27. Bonds +5 to +17 bp since 9/27.

  • Single A Healthcare: No longer a short indicator as of October 22. Bonds +4 to +15 bp since 9/22.

  • Single A Industrials: No longer a short indicator as of October 22. Bonds +5 to +15 bp since 9/22.

  • BBB Autos: 83 bonds ($99.4 billion) are overvalued, with 53 short trade indicators

U.S. IG Credit Valuation and Spreads

U.S. IG Credit Valuation and Spreads

  • Credit Spread Recovery: U.S. credit spreads have recovered 34% of the widening observed from November 12, 2024, to April 10, 2025.

  • Model Valuation: IG and HY markets show modest overvaluation. Post earnings announcements from 152 of the world's 255 largest issuers of corporate debt 144 issuers are increasing leverage.

2025 10-Year Credit Spreads

  • Year-over-Year (YoY): are wider compared to last year.

  • Year-to-Date (YTD): are wider.

  • UST 10-Year Rates: -16.9bp YoY and -43.2bp YTD.

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

No new G-255 supply Friday. So far, 10 of the world's 255 largest corporate debt issuers have tapped the US market for $37.25B in November and $1.023T in 2025.

US Equity Correlation to Overall US Credit Spreads

US equities and credit markets failed to correlate directionally for a fourth straight day Friday: credit spreads widened while most equities posted small gains. 2025 is on track for the second-weakest year in 32 for USD credit-equity correlated movement—historic 80% vs. ~73% this year.

For G-255 issuers, equity prices of the world's most indebted companies fell ~2.5% over the past month, while the S&P 500 rose 0.22%.

  • G-255 issuers refer to 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. This universe represents the most heavily indebted and actively traded global companies.

  • Purpose in the model: G-255 serves as a core benchmark for high-liquidity, high-impact issuers. Metrics track

hits like six-month highs in long indicators or correlations between G-255 equities/bonds vs. overall markets. It's used for daily trade allocations, post-earnings digests, and spotting trends (e.g., communications sector weakness or regional banks as most-bought credits).

  • This framework is part of a quantitative, rules-based approach to credit and equity trading, emphasizing data

driven insights over discretionary decisions. The exact list of 255 issuers isn't publicly detailed but aligns with globally indebted giants (e.g., Toyota, Volkswagen, or major TMT firms), often overlapping with top-debt rankings from sources like Statista or Janus Henderson.

G – 255 issuer news

Pfizer Inc. (PFE A2/A; attractive long credit/equity) agreed to buy Metsera for up to $10B, outbidding Novo Nordisk A/S after US regulators blocked the Danish firm's rival offer for the obesity-drug startup.

American Airlines (AAL Ba1/BB+; attractive long credit/equity), United Airlines (UAL Ba1/BBB-; attractive short credit/equity), and Delta Air Lines (DAL Baa2/BBB; attractive long credit/equity) canceled hundreds more flights this weekend, delaying New York airports and others as federal authorities curb air traffic amid the government shutdown.

UPS (A2/A; attractive short credit/equity), FedEx (FDX Baa2/BBB; attractive long credit/short equity), and Boeing (BA Baa2/BBB-; attractive long credit/equity) grounded their McDonnell Douglas MD-11 fleets on Boeing's recommendation after a crash in Louisville killed over a dozen people this week.

  • Attractive Long Indicators: 92, +13 from Friday and -16% below the 200-day moving average of all model long trade indicators.

  • Attractive Long Market Cap accounts for: 36% of all undervalued Systematic Credit capital.

  • Attractive Short Indicators 461, -77 from Friday and -9% below the 200-day moving average of all model short trade indicators

  • Attractive Short Market Cap accounts for: 33% of all overvalued Systematic Credit Capital

Systematic Portfolio Trading Model Indicators

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

  • Short Positions: 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.

Systematic Credit Trading Strategy – November 10, 2025:

  • Closed Positions: United Health (A2/A) UNH 3.05 05/15/41 short trading indicator reached its avoid trading level Friday. John Deere Cr. (A2/A) DE 5.45 01/16/35 short trading indicator reached its avoid trading level Monday. BP (A2/A-) BPLN 3.06 06/17/41 short trading indicator reached its avoid trading level Tuesday. Citicorp (A3/BBB+) C Float 09/11/31 long trading indicator reached its avoid trading level Wednesday. General Motors Financial (Baa2/BBB) GM 2.7 06/10/31 short trading indicator reached its avoid trading level Friday.

  • Enter New Longs: The model added new issues Philip Morris (A2/A-) PM 4 1/4 10/29/32 and Lloyds Bank (Baa3/BBB-) LLOYDS 6 5/8 PERP as long trade indicators. Lloyds Bank (A3/A-) LLOYDS Float 11/04/31 was added by the trading model as another long trade indicator on Tuesday. 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 Friday.

  • Enter New Short Trades: The trading model added General Motors Financial (Baa2/BBB) GM 2.7 06/10/31 (short indicator) post new GM supply 7 trading days ago. 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 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 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.

Friday's Basket Trade Long/Short Ratio: 67%

Our systematic trading 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 minimizing volatility risk. The model employs only publicly available data.

Current Sample Systematic Basket bond trades based on trading strategy

New Trade Indicators Friday: General Motors (Baa2/BBB) GM 2.7 06/10/31 reached its avoid trading level.

Systematic Long/Short Basket Trade Performance Report (January 4, 2025 – November 7, 2025)

Performance Summary: Total Trades: 184 (1% of total trades).

  • Long Indicators: 125/144 reached avoid-trading levels, tightening by -9.23 bp.

  • Short Indicators: 32/40 reached avoid-trading levels, widening by +5.73 bp.

  • Remaining Longs: 19 widened by +3.6 bp.

  • Remaining Shorts: 8 tightened by -8.12 bp.

  • Average Spread Movement: ± 6.54 bp in the recommended direction.

  • Success Rate: 87% of indicators reached avoid-trading levels, which is slightly below normal.

  • Average trade holding period: 22.2 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.