WASHINGTON - THE US Treasury on Wednesday announced it would sell US$40 billion dollars in 35-day bonds to help the Federal Reserve as it battles to shore up the struggling economy.

The announcement came on the heels of the Federal Reserve's decision late on Tuesday to provide American International Group (AIG) with a US$85 billion loan in return for a 79.9 per cent stake in the company.

In a statement, the treasury said it was launching 'a temporary supplementary financing programme' at the request of the Fed, as it pumps money into the US economy.

'The programme will consist of a series of treasury bills, apart from the treasury's current borrowing program, which will provide cash for use in the Federal Reserve initiatives,' the statement said.

The Fed has announced a series of spectacular moves to help the country's economy, including bailing out AIG.

Last weekend, the government took over mortgage finance companies Fannie Mae and Freddie Mac, and in March it helped salvage investment bank Bear Stearns.

On Tuesday it injected US$70 billion of liquidity into the US economy to help stressed financial markets, to keep credit flowing for banks amid the credit squeeze.

The US central bank also had injected US$70 billion into financial markets amid turmoil on Monday following the bankruptcy of Wall Street giant Lehman Brothers. -- AFP