Our Fixed Income Top Picks
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AI Could Be the New Profit Driver for Digital Platforms
In recent years, artificial intelligence has become one of the most important topics in the technology sector. While much of the attention is focused on model developers and companies providing infrastructure, the long-term winners in this technology may also emerge on the application side. The interactive media segment is particularly interesting from this perspective, as the business models of companies operating in this field rely heavily on monetizing user attention and producing digital content. In the second part of our industry analysis series, we review current trends and potential catalysts affecting search engines and social media platforms.
European Software Companies Are Set to Make a Comeback
European stock markets are currently outperforming their U.S. counterparts, and thanks to the gains of the past few days, our screenings have identified a number of interesting stocks. Among these, we have highlighted stocks that have recently shown signs of a structural turnaround, while strengthening buying pressure is also supporting the positive technical picture. One such company is Germany’s Nemetschek, a leading provider of construction and architectural design software. The other is the Dutch firm Wolters Kluwer, which offers professional information, software, and specialized database solutions. For both stocks, the search for long entry opportunities may have begun.
Developments over the past two weeks have demonstrated that geopolitical and inflation risks have not disappeared. Nevertheless, yields in both the euro area and the United States are currently within what we consider to be reasonable ranges. Our latest selection features bonds that may offer attractive risk-adjusted return potential as part of a suitably diversified portfolio.
Until the first week of July, oil prices had normalised significantly, materially easing inflationary pressures and potentially increasing the appeal of longer-duration bonds. Yields in both the United States and the euro area are currently within what we consider to be reasonable ranges. However, recent developments in the Middle East suggest that the US–Iran ceasefire remains rather fragile, potentially leading to renewed volatility in both oil prices and bond yields. Nevertheless, corporate bond yields have returned to near-historical lows.
Euro-Denominated Corporate Bonds
The conflict involving Iran caused only a temporary spike in corporate bond yields. By the summer, yields had returned to near-historical lows as investor risk appetite recovered. Developments over the past two weeks have yet to result in any material change in this picture. Euro-denominated high-yield (HY) bonds continue to offer only a minimal yield premium over investment-grade securities. The additional credit risk should therefore be carefully assessed when selecting individual bonds.
Dollar-Denominated Corporate Bonds
Our selection of US dollar-denominated bonds includes several regional corporate issuers. Two OTP bonds are featured: subordinated instruments maturing in 2033 and 2035. The list also includes bonds issued by two Turkish companies, as well as a Telekom Srbija bond. Among US issuers, our current selection features one bond each from Amazon and United Airlines.
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