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Commodities - Technical Analysis
Signs of a turnaround have emerged for gold and silver, and a strong upward move could trigger the next upward wave. A breakout above the key downtrend lines could also be on the horizon, which would further reinforce the positive turnaround. The price of oil has broken below the 100-day moving average, weakening the bullish outlook, and with the uptrend broken, it has entered a correction phase. Natural gas is showing a correction following a sharp decline, but has not yet managed to break through its downtrend line. Copper continues to trade within a wide range and is approaching the lower end of that range. Following a significant decline, wheat and corn prices have reached key support levels from which an upward correction—or even a new uptrend—is likely to begin.
FX - Technical Analysis
The dollar's momentum has eased, but confirming a trend reversal would require a decisive bearish session against the euro. Against the British pound, however, the exchange rate remains in an uptrend. EUR/HUF continues to trade within a narrowing range, while the dollar remains in an uptrend against the forint. USD/JPY has broken out to the upside from its consolidation pattern, suggesting further upside potential. EUR/CHF previously broke below a key support level that had defined its uptrend, and the pair is now characterized by a downtrend.
Although forint-denominated assets are currently performing exceptionally well, we still consider it important to diversify the bond portfolio by currency, which should be achieved through euro- and dollar-denominated regional government bonds, as well as euro- and dollar-denominated securities issued by highly rated companies. Currency diversification is not a stance against forint-denominated assets, but is necessary to reduce concentration risk. In our analysis, we have selected instruments linked to fundamentally stable issuers that offer acceptable yields in the current market environment.
Historically, U.S. corporate bond spreads remain at very low levels, although they have risen slightly recently due to the conflict in Iran. Spreads for investment-grade (BBB) bonds are hovering just above 1%, while those for BB-rated bonds (1.72%) are also close to their lows (1.56%). We saw similar movements in the European high-yield bond segment; the spread rose from 2.60% in February to as high as 2.96% by mid-April, but it remains well below the long-term average.
Euro-Denominated Corporate Bonds
Yields on corporate bonds remain at low levels, even though the conflict in Iran has caused a slight increase. At the same time, as we get closer to the end of the war, risk appetite is returning to the capital markets. There is only a very minimal yield premium, if any at all, for euro-denominated high-yield (HY) securities compared to the investment-grade category. Therefore, one must consider whether it is worth taking on greater risk for a relatively small premium.
Dollar-Denominated Corporate Bonds
Companies in the region typically issue bonds in euros, so the supply available in dollars is much more limited. The list includes two bonds linked to OTP, a subordinated instrument maturing in 2033 and another in 2035, as well as a Hungarian-issued bond, namely MVM’s note maturing in June 2028.
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