UPDATE 1-Greece to sell T-bills on Aug 14 to repay bond
* Debt agency needs to roll over 1.6 bln in 3-month T-bills
* Proceeds to also pay government bond due Aug. 20
ATHENS, Aug 10 (Reuters) - Greece will auction 3.125 billion euros ($3.83 billion) of three-month T-bills on August 14 to fund the rollover of a previous issue and repay a 3.2 billion euro government bond maturing this month, the country's debt agency said on Friday.
Cash-strapped and behind targets agreed under a 130 billion euro bailout, Athens will use most of the proceeds to pay down the 3.2 billion euro bond which falls due on Aug. 20. The bond is held by the European Central Bank.
Athens expects to raise a total of 5.0 billion euros from the sale as it will accept additional non-competitive bids of up to 60 percent of the auctioned amount by Aug. 16.
Shut out of bond markets, Greece issues T-bills on a monthly basis to refund maturing short-term paper. A previous 1.6 billion euro issue of three-month paper matures on August 17, the settlement date for next week's auction.
Only primary dealers will take part in the auction and no commission will be paid, the debt agency said.
Greek banks traditionally buy the bulk of the T-bill issues, meaning funding costs do not fully reflect market strains. They can park the T-bills at the local central bank as collateral to tap its so-called emergency liquidity assistance (ELA) window.
A similar auction of three-month paper last month was priced to yield 4.28 percent and its bid-cover ratio was 2.12.
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