UPDATE 1-Greece to reopen three-, five-year bonds in coming weeks- govt source
* Greece to top up recent 3-, 5-year bonds by up to 1.5 bln euros
* Will only accept T-bills as payment, not cash
* Move aimed at boosting liquidity at this segment of yield curve (Adds quotes, details)
ATHENS, Aug 25 (Reuters) - Greece plans to reopen its recent three- and five-year bond issues in the next two weeks, to top them up by as much as 1.5 billion euros ($1.97 billion), accepting T-bills as payment instead of cash, a senior government source told Reuters.
The debt exchange is aimed at improving the functioning of the secondary bond market, boosting liquidity and tightening spreads. By retiring up to 1.5 billion euros of outstanding T-bills, Athens will also have the margin to reissue the same amount in new 12- or 18-month T-bills. Its outstanding stock consists of 3- and 6-month T-bills.
"There is a plan to reopen these issues in the next couple of weeks. Payment will be in outstanding T-bills instead of cash," the government official said on Monday on condition of anonymity.
Athens returned to international bond markets this year for the first time since it was forced to require a first international bailout in 2010, with a five-year bond issue in April and a subsequent three-year issue in July, raising a combined 4.5 billion euros from foreign investors.
The country has enjoyed a revival in investor sentiment in recent months and seen bond yields fall along with those of other countries in the euro zone periphery.
Athens has a stock of about 15 billion euros of outstanding T-bills and refinances them on a monthly basis.
"The move to reopen the recent bond issues is also aimed at giving Greek banks a more active role in the secondary market so they can play their part as primary dealers," the official said.
Greece's three-year bond issue in July raised 1.5 billion euros, less than Athens expected, as worries about the health of a parent company of Portugal's largest listed bank hit demand for riskier euro zone debt.
Investor sentiment has picked up since then. After nearly crashing out of the euro zone in 2012, the country expects to return to economic growth this year following a six-year recession that has shrunk its economy by a quarter. (Reporting by George Georgiopoulos; Editing by Susan Fenton)
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