THE NATIONAL Treasury Management Agency (NTMA), which manages the Government’s debt, plans to hold an auction of treasury bills tomorrow.

The announcement came as Pioneer Investments said its funds were betting that Ireland’s credit rating would be lowered again.

Pioneer is one of the top-five holders of Government debt and the company is staying “underweight” in Irish bonds – meaning it owns a smaller position than in the benchmark index used to measure its performance, according to Marco Meijer, a money manager who helps oversee about €22 billion of government securities.

Pioneer also “actively bought” credit-default swaps on Irish debt, which protect against bond losses, anticipating they will rise in value.

Ireland’s credit rating was cut for the second time this year on Monday by Standard Poor’s, which said the cost of propping up the nation’s banks would weigh on Government finances.

“Things have looked very shaky since the end of last year,” Mr Meijer said in an interview from his office in Dublin.

“The Irish Government is taking on a huge liability by guaranteeing all banks. I’m very pessimistic.”

Irish bonds fell yesterday, driving the difference in yield, or spread, between Irish and benchmark German 10-year government securities four basis points wider to 206 basis points as of 4.15pm in London. The rate is likely to return to the record 395 basis points reached on February 17th, according to Mr Meijer.

Standard Poor’s said the cost of rescuing the banks may rise to as much as €25 billion, against its previous forecast of €15 million to €20 billion. It cut the rating one step to AA, from AA+.

The credit rating agency assigned a “negative” outlook to the grade, signalling it is more likely to cut it again than leave it unchanged or raise it.

The company removed Ireland’s top AAA rating in March.

“There’s likely to be more downgrades to come as we believe rating agencies are behind the curve,” Mr Meijer said.

The cost of hedging against losses on bonds issued by Irish banks rose. Bank of Ireland credit-default swaps climbed 32 basis points to 361 basis points and those linked to AIB advanced 30 basis points to 355 basis points, according to CMA prices.

Pioneer is ranked third among holders of Irish Government securities that make regulatory filings, according to data compiled by Bloomberg.

Moody’s Investors Service analyst Dietmar Hornung said “we appreciate the Government is taking action, but Ireland is facing a very challenging situation”, commenting on the Government’s plan to create the National Asset Management Agency (Nama).

Moody’s on April 17th placed Ireland’s triple-A Government bond ratings on review for possible downgrade.

Mr Hornung said: “As normal, in the case of a rating under review, the rating decision is made within 90 days, so in this case 90 days from mid-April.” – (Bloomberg)