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Commodities - Technical Analysis
Gold and silver have broken their downtrends, triggering upward waves that still hold potential for further gains. After a strong retest, the oil price may settle into a range, but there are still opportunities for further gains. Natural gas prices did not reach a new low, but no pattern indicating a reversal has yet emerged. Copper is maintaining its upward trend; it must rise again within the next few days, or the rally could break down. Wheat and corn are also beginning to turn upward again from key support levels after strong retests.
Strong performance from Expedia
Despite the war in the Middle East and rising energy prices, U.S. consumer spending—and, by extension, travel DEMAND—proved to be sufficiently resilient in the second quarter, from which Expedia also benefited greatly. The company beat analysts’ expectations across all major metrics, with revenue growing by 14%, while also successfully maintaining its strategic goal of cost control, resulting in profit growth of over 20%. Cash generation is very strong, which is being used to repurchase shares, and for now, there's no sign of a slowdown on the demand side, leading the company to raise their full-year expectations for this year. Given the improving fundamentals, we are raising our fair value estimate to $365.
In order to achieve diversification in terms of currency, government bonds denominated in euros and dollars in the region — particularly Hungarian and Romanian bonds — offer attractive returns with acceptable — albeit increasing — risks.
Euro or dollar bonds issued by companies in the region (including Turkish issuances more broadly) still offer a yield premium over similar-rated bonds issued by companies in Europe or the US, while the risk profile of the former is similar or better.
Euro-Denominated Corporate Bonds
Yields on corporate bonds issued in euros have fallen steadily over the past three months as risk appetite has improved. This makes it particularly difficult to find corporate bonds that still offer meaningful yields at acceptable risk levels.
Dollar-Denominated Corporate Bonds
Companies in the region typically issue bonds in euros, with a much narrower list available in dollars. For this reason, the list includes two MREL bonds issued in recent years that are linked to OTP, of which the 2027 senior preferred is ranked higher than the longer-maturity 2033 subordinated paper. In both cases, there is the possibility to call the bonds earlier, in which case the resulting yield potential is much more limited.
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