Our Fixed Income Top Picks
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US bank shares fell
The third-quarter earnings season in the US has picked up pace following the release of the latest figures from US banks. Based on preliminary expectations, the third quarter is likely to have closed with strong earnings growth for S&P 500 companies, led by the energy and technology sectors. The major US banks have still achieved solid growth on an annual basis, indicating that their operations remain strong, but the pace has clearly slowed in many cases, which has tended to result in negative share price reactions.
Commodities - Technical Analysis
Gold and silver continued their downward trend, bouncing off key levels. Until their downward trends are broken, they will not be able to produce a significant rise. The fall in oil prices reversed from the $87.5 level and began a slight upward movement. Natural gas remained in an uptrend; a significant rise could even occur if it breaks out upwards. The price of copper has become stuck in a wider range, so the oversold and overbought zones may offer more favourable trading opportunities. The falling prices of wheat and corn have reached key support levels; a buying reaction from these levels could present favourable long opportunities with limited risk.
U.S. and European corporate bond spreads remain at historically low levels, leaving limited room for yield premiums, particularly in the high-yield segment. Regional sovereign and corporate bonds denominated in euros and U.S. dollars still offer attractive alternatives with moderate risk profiles. In this report, we have selected instruments linked to fundamentally solid issuers that provide a balanced risk-return profile in the current market environment.
Diversification of the bond portfolio by currency should continue to be implemented through euro- and dollar-denominated regional government bonds (Hungarian, Romanian, Albanian), as well as high-quality corporate bonds issued in euros and dollars.
Euro-Denominated Corporate Bonds
Corporate bond yields remain at low levels, as risk appetite in the capital markets is currently high, supported by strong profit outlooks and a favorable macroeconomic environment. January started with an exceptionally strong wave of corporate bond issuance. In such an environment, it is challenging to find corporate bonds that still offer meaningful yields at acceptable risk levels. For this reason, we have kept well-known names on our list, as finding better alternatives is difficult.
Dollar-Denominated Corporate Bonds
Companies in the region typically issue bonds in euros, with a much narrower list available in dollars. The list includes two OTP-related bonds—subordinated instruments maturing in 2033 and 2035. Both have early call options, which can significantly limit the yield investors ultimately realize. Another Hungarian-linked bond on the list is MVM’s note maturing in June 2028.
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