THE GOVERNMENT aims to raise up to €10 billion from investors through a new funding programme using treasury bills, a type of short-term IOU that gives the State another means of raising money for the exchequer.

The programme was launched as the 10-year German bund ended three days of losses, pushing the difference in the cost of German state borrowing with the equivalent Irish bond to its widest level in 16 years.

European government bonds advanced as investor demand for safer fixed-income securities rose on evidence that the global economic slump was deteriorating.

The State’s money manager, the National Treasury Management Agency (NTMA), will try to raise up to €1.5 billion in the first auction of State treasury bills on March 26th. The bills mature over short-term periods, covering one, three, six, nine and 12 months.

Oliver Whelan, director of funding and debt management at the NTMA, said the treasury bills would give the State another avenue by which to raise money.

Irish Government bonds have come under pressure after credit ratings agency Fitch said last week that the State may lose its top AAA-rating due to worsening public finances.

The NTMA already sells exchequer notes, which are similar to treasury bills, but these are only sold to domestic investors and for sums of up to €1.5 billion.

The treasury bills will enable the State to raise much larger sums of money, in addition to the €20 billion it has raised from investors through the sale of short-term commercial paper, a type of security used for funding purposes by governments and companies.

The NTMA has raised longer-term funding of €10 billion so far this year out of a record €25 billion that the agency is planning to raise in 2009 so as to fill the deepening hole in the Government’s finances.