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MERRILL Lynch all but closed down its fixed income operations in Asia this week, providing one of the most potent symbols yet of the depths to which the region's debt market has plummeted.

THE CHINESE government intends to honour forthcoming interest payments on Gitic's outstanding Yankee debt despite its abrupt closure of the group last week. While concerns have been growing that the republic might be heading towards its first international bond default, bankers connected to Gitic's two Yankee issues said that the State Administration for Foreign Exchange (Safe) had made its intentions fairly clear.

Australia The Australian Stock Exchange became the first stockmarket to list itself, this week raising A$427.6m ($270.2m) for its 606 members. Shares in the ASX opened at A$4.10 each and gained throughout the day before closing at A$4.25.

THE STRENGTH of local investor demand in Argentina's domestic bond market was confirmed this week when the government received $2bn of bids for $700m dollar denominated Treasury bills, and sold them at lower than expected rates. The bills, called Letes, were offered in two tranches: a $250m issue of 91 day paper at 10%, and $500m of six month securities at 13.5%. The 91 day issue had a bid to cover ratio of four and the six month tranche a ratio of two.

THE POLISH city of Krakow is set to launch a DM70m two year floating rate note at the end of the month, market conditions permitting. The issue will be lead managed by Bank Austria Creditanstalt and WestLB/West Merchant Bank, which will host investor roadshows to promote the Euromarket offering -- the first by a municipal credit from Poland -- in Frankfurt and London in the week beginning October 26.

* Lebanon's Banque de la Mediterranée upped its 8.625% October 2003 Eurobond by $25m last Friday (October 9). The original issue was launched via bookrunner Paribas on October 5 for $50m at a spread of 425bp over the interpolated August and November 2003 US Treasuries. Thanks to the back-up in Treasury yields late last week and strong outstanding appetite for the paper, the increase was brought to come to market at a re-offer margin of 398bp.

RUSSIA'S Republic of Sakha is set to default on a $50.5m credit-linked note which falls due today (Friday) -- making it the first Russian region to fail to make repayment on a Euromarket obligation. The one year issue, structured via Cayman Islands-registered debt repackaging vehicle Earls Three, was lead managed by Deutsche Bank in October 1997.

SPREADS on some investment grade US corporate bonds closed as much as 20bp tighter yesterday (Thursday) compared to last week's levels as the market warmed to the Federal Reserve's unexpected 25bp cut in its federal funds and discount rates. In a move not seen since 1994, the Fed eased monetary policy between Federal Open Market Committee (FOMC) meetings, taking its discount rate to 4.75% and the federal funds rate to 5%.

CZECH aerospace company Aero Vodochody has mandated CIBC Wood Gundy Oppenheimer and Deutsche Bank to joint lead manage the company's debut international bond. Following investor roadshows in Europe this week and the US next week, a probable $200m or so seven to 10 year Euro/144A offering should emerge in the week beginning October 26, market conditions permitting.

GLOBAL co-ordinators Schroders and Powszechny Bank Kredytowy w Warszawie (PBK) will next week launch the bookbuilding period for the Polish government's sale of stock in Telekomunikacja Polska (TPSA), the country's national operator. The sale has been dogged by the emerging markets crisis and London salesmen are sceptical of investors' willingness to participate. Many smaller deals from central Europe have been cancelled as vendors able to wait for more stable market conditions plan to reconsider their options next year.

MERRILL Lynch and Merita will shortly open the books on the Finnish government's sale of stock in Sonera, the national telecom operator. Following two weeks of pre-marketing, the deal looks in relatively good shape. "This is another Swisscom," said one banker. "The company is the telephone company in Finland and will be a good story, particularly for index funds and some of the passive investors in the region."

WARBURG Dillon Read has postponed the IPO for Spanish travel reservation group Amadeus Global Travel Distribution. The deal had intended to raise $400m and was pulled as the vendors of the company rejected the valuation put on their assets by the market.