Greece said on Monday it would issue T-bills in mid-July to cover maturing debt, a bold but risky test of market appetite in its first auction since securing a mammoth EU and IMF bailout last month.

The debt-choked country is not expected to issue longer-term debt before 2012 but is allowed to issue T-bills, which have shorter maturities, under the terms of the 3-year, 110-billion euro ($136.1 billion) emergency funding program.

"It could prove in the end to be a good idea but it could also end in disaster," Carsten Luedemann, fixed-income strategist at DekaBank, said.

"If they don't find any bids at all or only at ridiculous levels this would prove finally that Greece is not able to go to the markets, this would be a disaster for Greece."

Luedemann said there was a small chance Greece could sell 3 or 6-months T-bills slightly cheaper than the rate of about 5 percent it will pay on its bailout, because these bills fall due before the financing guarantee for Greece expires.

A total of 4.56 billion euros ($5.64 billion) of T-bills mature in July -- 2.16 billion euros of one-year and six-month government paper are due on July 16 and another 2.4 billion of 13-week T-bills on July 23.

"Greece will go to the markets mid-July, issuing T-bills of three, six and twelve months," Deputy Finance Minister Philippos Sachinidis told Reuters. Greek officials have previously said the country may go ahead with a T-bill auction in July but Sachinidis' comments confirmed those plans.

Sachinidis did not say how much Greece was planning to sell.

Analysts said that investors could show interest in T-bills, despite a sell-off of bonds, since they carry less risk.

"Buying such short-term debt is relatively safe for investors," said Kornelius Purps, bond analyst at UniCredit. "I think it will be a relatively successful auction, in the sense that Greece will be able to place all its debt volumes."

But he said failure would have wider repercussions.

"If Greece doesn't manage to sell all the T-bills, this would affect the entire market sentiment. Then people would start to raise questions about whether Greek commercial banks, who are expected to be the main buyers, are capable of refinancing themselves," he said.

The July auctions will take place as index providers like Citigroup and Barclays Capital have signaled Greek bonds will be removed from the gauges, forcing fund managers to dump the bonds.

"I'm not sure the timing is right after the sell-off that we have seen over the past two to three weeks," said Ioannis Sokos, at BNP Paribas.

"Greek bonds are dropping out of various bond indices because of the Moody's downgrade while the expiration of ECB's 1y LTRO (440bn) could create some near-term pressures due to the over-participation of Greek banks in June 2009," he said.

Sokos nevertheless said international investors could find T-bills more attractive.

"Support from domestic investors will also be critical. The price is going to be a bit steep, but the fact that Greece is on track with respect to its stability and growth programmed and for as long as EU and IMF disbursements keep coming, worst case scenarios will have a very low probability attached."