GMAC Inc on Wednesday launched a new government-backed bond sale ahead of a regulatory deadline next month that will test the company's capital levels and ability to absorb losses.

GMAC came to market with a $2.9 billion three-year government-guaranteed note issue expected to price as soon as Wednesday, according to IFR, a Thomson Reuters service.

The bond sale comes amid conversations the Detroit-based firm, the traditional lender to General Motors Co, is having with the U.S. Treasury about a possible third cash infusion to its GMAC Financial Services Inc unit.

GMAC, which is also taking over the auto loan business of Chrysler, converted to a bank holding company in December to become eligible for bailout money the U.S. Treasury was pumping into banks.

Bank holding companies, including GMAC, that regulators have viewed as being undercapitalized face a November 9 deadline for implementing plans to enhance their capital positions.

Concerns that GMAC could fail the impending test had sent the cost of insuring debt at its residential mortgage arm, Residential Capital, spiraling in the past week as investors worried that the unit would need to be spun off.

Credit default swaps insuring ResCap's debt plunged 10 percentage points on Wednesday, to around 29 percent of the sum insured as an upfront cost, as these concerns ebbed.

That means it would cost $2.9 million to insure $10 million in debt for five years, plus annual payments of $500,000.

Concerns that GMAC will fail the November tests are likely overdone, said Ricardo Kleinbaum, trading sector specialist at BNP Paribas in New York.

We would expect Rescap to be protected in any further capital injection given the importance of its mortgage servicing unit, though origination volumes are dropping, he said.

GMAC is also scheduled to report its third-quarter earnings on November 4.

The cost of insuring GMAC's debt with credit default swaps fell on Wednesday to around 630 basis points, or $630,000 million per year to insure $10 million for five years, from around 690 basis points on Tuesday, according to Markit Intraday.

GMAC's new bonds are expected to yield 10 basis points less than midswaps, which are the mid-point between bids and offers on interest rate swaps.

The debt will be backed by the Federal Deposit Insurance Corp under its Temporary Liquidity Guarantee Program, set up to relieve a financing squeeze for U.S. banks during the credit crisis. The program is set to expire on October 31, though a limited six-month safety net may be extended if needed.

Thanks to the government guarantee, the notes will be rated AAA by all three major rating agencies.

Citigroup, Deutsche Bank, Morgan Stanley and RBS are managing the bond sale.

(Additional reporting by John Parry, Walden Siew and Dena Aubin; Editing by Chizu Nomiyama and Dan Grebler)