ATHENS (AP) ― Greece held its biggest debt sale since its economy imploded two years ago as it raised 4.06 billion euros ($5.01 billion) in a short-term debt to pay off a bond due next week.

Athens will now avoid having to ask for emergency funding to pay off a 3.2 billion euros ($3.9 billion) bond that matures Aug. 20 and is held by the European Central Bank.

However, the debt-crippled country saw its borrowing costs rise, while demand for the 13-week treasury bills was much lower than in last month’s issue. The interest rate in the auction was 4.43 percent, up from last month’s equivalent 4.28 percent, Greece’s debt management agency said in a statement. In comparison, Germany offers near-zero yields in its T-bill issues.

The auction was 1.36 percent oversubscribed as against 2.12 times last time.

Manos Chadzidakis, head of analysis at Greece’s Beta Securities, said the issue was an overall success, despite the higher cost and “moderate” investor interest.

“The size of the issue was to be expected given Greece’s considerable needs in August, particularly the expiring bond issue,” Chadzidakis said. “But what created something of a sensation was the cost, which I would call quite steep.”

Greece has been kept afloat by bailouts from its European partners and the International Monetary Fund since May 2010, after being priced out of bond markets. The rescue loans came in exchange for harsh austerity measures and reforms to its expensive, bloated and largely inefficient public sector.

Over the past two-and-a-half years, Greeks saw their incomes dive as taxes were repeatedly hiked and welfare spending was slashed. The misery has been compounded by soaring unemployment and a fast-contracting economy, with the cumulative recession since 2008 expected to approach 20 percent at the end of this year.

But the cash lifeline has been disrupted by months of political instability in the Spring ― only resolved after two national elections ― during which the austerity and reform process lagged severely. As a result, the next 31 billion euros installment, if approved by bailout creditors following a review of the country’s finances, has been delayed until next month at the earliest.

To qualify for that payment, Greece’s eight-week-old coalition government must identify by the end of the month a new round of cutbacks worth 11.5 billion euros ($14.2 billion) for 2013 and 2014.

While unable to access bond markets, Greece is maintaining a market presence with regular T-bill auctions.

Tuesday’s was the biggest since Athens requested its bailout loans, and mostly attracted domestic banks that use treasury bills as collateral for their emergency funding.

Chadzidakis said the T-bills were also bought for “obvious” investment purposes, given the high yield they offer.