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Commodities - Technical Analysis
Both gold and silver are in a short-term downtrend. It is still worth waiting for buying opportunities in these markets. Oil is becoming increasingly range-bound, which could set the stage for a significant move soon. Natural gas prices have been on an upward trajectory since breaking out of their downtrend. Copper has reached the projected level, from which a downward correction has begun. Wheat and corn are in a correction phase within their upward trends.
FX - Technical Analysis
The dollar’s trend reversed at the beginning of last week and started to strengthen. It has already reached the first target level; the natural level at 1.1597 should act as support, otherwise we may see further dollar strength. The Hungarian forint is undergoing some correction against both the euro and the dollar, but this is still not sufficient for a structural shift in the downside pattern, and reversals in the curve still need time to develop. In the case of the USD/JPY pair, there may be a chance for a reversal below the 159.38 resistance, but this would require a strong downward move within the next few days. In EUR/CHF, a higher low may form, which could indicate a turn to the upside.
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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