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UPDATE 2-Ireland sells 5.5 billion euros of 10-year bonds at negative yield

(Updates with results of sale)

DUBLIN, Jan 5 (Reuters) - Ireland’s debt agency raised almost a third of its annual fundraising target on Tuesday by selling 5.5 billion euros ($6.75 billion) worth of 10-year bonds at a negative yield.

Demand of more than 40 billion euros pushed the yield of the new 10-year benchmark bond to minus 0.257% in the syndicated sale, the National Treasury Management Agency said in a statement.

The agency has said it aims to borrow between 16 billion and 20 billion euros on the bond market this year.

“Today’s transaction brings us to over 30% of the mid-point of our target funding range,” the agency’s head of funding, Frank O’Connor, said in a statement.

He described it as an encouraging start that “demonstrates the continued strong demand from a broad investor base for Irish sovereign debt.”

New issuance by Germany and Italy also found strong demand on Tuesday, showing investors eager to bet on expectations that European Central Bank bond-buying and the European Union’s recovery fund will prop up the euro zone bond market in 2021.

Ireland’s 16-20 billion euro target for 2021 is down from 24 billion euros raised last year to help fund the government’s response to the COVID-19 crisis, when a huge increase in public spending turned 2019’s budget surplus into an expected large deficit.

While Ireland’s economy performed better than expected last year, limiting the damage to state coffers, the government last week shut down large parts of the economy for a third time in the face of its worst outbreak of COVID-19 infections yet.

Finance Minister Paschal Donohoe earlier on Tuesday said he was confident that he had enough resources earmarked in his 2021 budget to deal with the current surge in infections. (Reporting by Conor Humphries and Graham Fahy; Editing by Larry King, Kevin Liffey and Alex Richardson)

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