PORTUGAL paid a higher interest rate to borrow US$1.2 billion in a debt auction yesterday that reflected continuing market nervousness about the eurozone's fiscal health.

Portugal had to ask for a US$110 billion bailout earlier this year to help pay heavy debts that have weakened its economy and alarmed investors.

The rescue package from the International Monetary Fund and Portugal's European partners was meant to help end the sovereign debt crisis which, despite leaders' efforts, has endured for more than a year.

To maintain a presence in the international debt market, Portugal auctioned three-month Treasury bills.

The government debt agency said it paid 4.959 percent for the loan, up from 4.854 percent in a comparable auction three weeks ago, demonstrating that Portugal remains at the mercy of investors who have demanded unsustainable returns to lend it money.

Demand was 2.2 times the amount on offer, slightly up from the last sale. The debt agency had intended to borrow more but dropped that plan as the interest rate ticked higher.

Joao Queiroz, head of trading at Portuguese financial group Banco Carregosa, said although the rate was high for a short-term loan, it was still lower than the 5 percent Portugal is paying on the bailout.

Queiroz said: "The biggest pressure for our sovereign debt is on medium and long-term loans, where rates are in the double digits."