Greece to auction T-bills on July 8 as scheduled despite bank hiatus

ATHENS (Reuters) - Greece will sell 1.25 billion euros ($1.38 billion) of six-month Treasury bills on July 8 to refinance a maturing issue, its debt agency said on Friday, amid uncertainty over whether the country's banks will reopen next week after a six-day shutdown.

Prime Minister Alexis Tsipras's plan to hold a referendum on Sunday on creditors' demands for austerity prompted a breakdown in talks with lenders, forced Greece to shut banks and left its future in the euro zone in doubt.

With only ATM machines and e-banking services working, cash-strapped Athens made a 3.8 million euro coupon payment on a privately held yen-denominated government bond on Friday.

The debt agency needs to refinance 2.0 billion euros of six-month paper that matures on July 10. A similar sale last month was priced to yield 2.97 percent.

"In a rollover, T-bill holders renew their positions instead of getting paid on the maturing paper they hold, so the sale can take place," a debt agency official told Reuters. "It will be a rollover just like all the others."

Based on the legislative act that imposed capital controls last week, banks are to reopen on Tuesday though the government has said they will only do so after a deal with creditors is reached. Even then, the banking system will struggle without further injections of emergency funding from the central bank.

European Central Bank Vice President Vitor Constancio said on Friday he could not say whether the ECB would provide emergency liquidity assistance (ELA) to Greece's banks if Greeks vote 'No' in Sunday's referendum.

The settlement date of the new T-bills will be July 10. Only primary dealers will be allowed to participate and no commission will be paid.

During acrimonious negotiations with its euro zone backers and the International Monetary Fund, Athens has pushed for an increase in the amount of T-bills it can issue to deal with its cash crunch.

But the European Central Bank has not allowed Athens to plug funding gaps by having its banks buy more short-term government debt and finance it through its central bank, amid concerns its bailout programme was off track. The programme expired on June 30.

(1 dollar = 0.9000 euro)

(Reporting by George Georgiopoulos, editing by Deepa Babington and John Stonestreet)