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Principal-protected retail equity-linked notes are back in vogue in Asia as global uncertainty triggers greater investor caution. "As the interest-rate and political situation [in the Middle East] remains unclear, clients are displaying an added degree of caution," said Patricia Lau, in equity risk management at UBS in Hong Kong. She noted investors have been shifting back to the capital guaranteed structures which dominated the retail note market two-to-three years back.

Prime Minister Ferenc Gyurcsany met with central bank officials to discuss the country’s euro covvergence programme. Hungary must submit a modified convergence programme to the European Commission by September 1. The earlier programme was rejected by the Commission because it failed to detail measures Hungary planned to take to reduce its deficit. Central bank governor Zsigmond Jarai, said bank officials had raised doubts about the government's austerity package, warning that the tax increases could raise inflation and hurt Hungary's competitiveness. He added that the government's 2010 target to adopt the euro was untenable. Mr Gyurcsany responded that the government aims to balance the budget half way through its term, which would require a later date to join the eurozone.

Los Angeles-based TCW Asset Management, a USD130 billion manager of 82 collateralized debt obligations, is ramping its first synthetic CDO squared to close later this month. The USD400 million deal, called Visage CDO I, will use total-return swaps to reference at least 40 tranches of cash asset-backed securities CDOs.

Leveraged super-senior collateralized debt obligations, a popular innovation in the corporate synthetic CDO market over the past year, are taking off in the commercial mortgage-backed securities market with Wachovia, Goldman Sachs and BlackRock all set to hit the market with such deals.

Legal and General’s head fund manager warns on underground credit growth

According to the People's Bank of China, money supply growth moderated in June. Official statistics showed that growth in M1 slowed by 0.07% from May while M2 growth slowed by 0.62%. The People's Bank of China has taken several measures to control the money supply. Earlier this year it increased interest rates by 27 basis points to 5.85%. Earlier this month it increased banks’ reserve ratio by 0.5%.

S&P analyses global equities; short rates interest Dresdner; Deutsche has "positive bias"

Standard and Poor’s downgraded the outlook on Lebanon’s credit rating to negative after Israel bombed airports and road links in retaliation for the kidnapping of two of its soldiers. Recent events will “depress the economy, and complicate economic policymaking," said analyst Farouk Soussa.

The Asian high yield bond market is under siege from a growing crowd of rating downgrades and downwards rating reviews, leading some bankers and analysts to ask whether the best days for Asian high yield credit in this cycle have already passed.

Syndication of the NT$32bn ($893m) loan backing Carlyle's leveraged buy-out of Eastern Multimedia Co is progressing well, according to bankers that have committed to the deal. The deal is unlikely to be launched into general syndication after its success at the sub-underwriting stage. Appetite for the deal has surprised some bankers who viewed the loan as too aggressive, saying that total debt will reach as much as 6.7 times earnings. A similar facility for the smaller Taiwan Broadband Communications, completed earlier this year, was structured around a leverage multiple of 4.5 times.

The return of confidence in Asia's equity new issues market strengthened this week, as two real estate investment trust IPOs went ahead in Singapore and a convertible bond and a global depositary receipt issue emerged from Taiwan.

Chipmaker Elpida Memory and metals and oil group Nippon Mining raised ¥207bn ($1.8bn) of new equity at tight 2% discounts this week, as investors showed their support for Japanese new issues.