General Electric's finance arm on Monday launched a $10 billion sale of FDIC-backed debt, the largest sale under the government guarantee program since its inception last November.

The General Electric Capital Corp sale will push total issuance under the government program to over $115 billion, according to Thomson Reuters data. Before GE Capital's deal, the largest sale under the program was $9 billion on Dec. 1 from Bank of America

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[BAC  Loading...      ()   ], according to Thomson Reuters data. (GE is the parent company of CNBC.)

The so-called Temporary Liquidity Guarantee Program was created in November to fill a financing gap for banks shut out of the corporate bond market by skyrocketing yields. The new asset class is being sold to a combination of traditional corporate, agency and Treasury investors, strategists said.

"TLG paper has been widely accepted in the United States and is still catching on in Asia," Jim Vogel, a strategist at FTN Financial Capital Markets in Memphis, Tennessee, said in an emailed message. European investors also bought aggressively when spreads were wider relative to London interbank offered rates in early December, he said.

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Despite top "AAA" ratings enjoyed by GE Capital, yields on its unsecured bonds had soared earlier this year amid worries that the credit crunch was making it more difficult for the massive finance company to roll over debt. GE Capital depends on easy access to funding to make loans for everything from office space to planes.

"They can borrow much more cheaply with the government guarantee, very simply," said Spencer Lee, head of trading at SCM Advisors in San Francisco.

Now is a good time for company debt sales, he added. 

"You've got historically low Treasury yields despite the sell-off of last few days and tightening credit spreads."

GE Seen Selling $2 Billion in 2-Year Notes

GE Capital is expected to sell $2 billion in two-year notes at mid swaps plus 15 basis points and $4.5 billion in 3.5-year notes at mid swaps plus 30 basis points, according to IFR, a Thomson Reuters service. It is also expected to sell $2.5 billion in 18-month quarterly floating-rate notes at five basis points over the London interbank offered rate and $1 billion in 3.5-year floating-rate notes at mid swaps plus 30 basis points.

The joint lead managers on the sale are Bank of America Securities, Citigroup, Goldman Sachs, JP Morgan Chase and Morgan Stanley.

Mark MacQueen, co-founder of Sage Advisory Services in Austin, Texas, said he did not participate in GE Capital's new deal because he bought FDIC-backed bonds from the company last year when spreads were wider.

"I know that some government funds are buying this paper and I know that's what's creating the demand at these much tighter spreads," he said.

Yields on GE Capital's unsecured debt had ballooned to nearly junk levels in early October amid worries that the global credit crunch was raising its financing costs to uneconomical levels.

In an effort to shore up its finances, GE has raised $15 billion through stock sales and has said it will scale back the finance arm and lower its leverage ratio.

Weighed down by troubles at GE Capital, GE's shares

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[GE  Loading...      ()   ] lost about half their value last year. Its shares fell again on Monday after an analyst said the U.S. conglomerate might have to lower its dividend or see its triple-A credit rating downgraded.

GE officials have repeatedly said keeping the "AAA" rating is a top priority. Standard & Poor's on Dec. 18 lowered it rating outlook on GE to "negative" from "stable," saying there is a one-in-three chance of a downgrade over the next two years.

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