* Euro zone rescue fund sees strong demand, more auctions
* Credit rating downgrade hangs over fund, cuts its power
(Updates with EFSF comment, details)
BERLIN, Jan 17 The euro zone rescue fund
sold 1.501 billion euros of new six-month bills on Tuesday, with
a bid-to-cover ratio of 3.1, Bundesbank data showed, a day after
U.S. ratings agency Standard & Poor's downgraded the EFSF by one
notch to AA+ from triple A.
The Bundesbank, whose systems were used to conduct the sale,
said the auction drew total bids worth 4.66 billion euros. The
weighted average yield was 0.2664 percent.
Last month the European Financial Stability Facility (EFSF)
sold 1.97 billion euros of three-month bills in an auction that
met solid demand, with a bid to cover ratio of 3.2.
EFSF Chief Financial Officer Christophe Frankel said in
a statement the fund will now hold regular auctions of 3-, 6-
and 12-month bills.
The Luxembourg-based fund, set up in 2010, was keen to
stress the strong demand for the bills as the debt crisis
weakens the credit ratings of main guarantors such as France,
which was downgraded to AA+ from triple A by S&P.
The EFSF's rating downgrade will substantially cut its
lending power unless its remaining four triple A euro zone
countries increase their guarantees -- the Netherlands, Germany,
Finland and Luxembourg -- which looks unlikely at this stage.
(Reporting by Alexandra Hudson and Annika Breidthardt in Berlin
and Robin Emmott in Brussels; editing by Stephen Nisbet)