UPDATE 3-Greek bond yields tumble as new bond sale meets with solid demand

Long-dated Greek government bond yields fell to their lowest in almost six months on Tuesday, outpacing euro zone peers, as demand for a new Greek five-year bond topped 10 billion euros.

More broadly, euro zone bond markets were supported by caution before Britain's parliament votes on Tuesday on proposals to change Prime Minister Theresa May's Brexit deal, and ahead of high-level talks between the United States and China on trade and Wednesday's Federal Reserve meeting. New bonds sold via syndicates of banks from Greece, Belgium and Austria were also in the spotlight.

Greece was set to raise 2.5 billion euros from a new five-year bond at a relatively competitive yield after drawing strong demand. The sale marked a small but significant step towards a resumption of refinancing its debt in the markets after years of tight supervision under bailouts. Greece's 10-year bond yield fell 8 basis points to 3.97 percent, its lowest level since early August. Five-year bond yields were last down over 6 bps at 2.974 percent , also its lowest in six months.

In the rest of the euro area, 10-year bond yields were little changed on the day . Greece has tested market appetite under the watch of its international lenders in recent years. It sold 3 billion euros of seven-year bonds nearly a year ago.

NOT JUST GREECE Belgium meanwhile received over 27 billion euros of demand for a 30-year syndicated bond, and plans to raise over 5 billion euros from the deal, according to a lead manager.

Austria completed a 5 billion euro 10-year bond sale, receiving over 28 billion euros of demand for the syndication, according to International Financing Review. Weaker economic conditions have boosted expectations that record low interest rates will remain in place for some time. This has encouraged governments to launch new bond deals and take advantage of renewed investor appetite for fixed income.

"There are two factors at play -- one is traditional front-loading of supply by issuers in the first months of the year," said Mathias van der Jeugt, rates strategist at KBC. "Second, is that issuers are profiting from the global growth worries and stock market turmoil that has pushed yields lower. Also, the ECB downgraded its growth forecasts last week which opens the door for easy monetary policy for longer."

A string of recent successful syndicated bond deals include long-dated sales from Spain and Italy this month that met with record investor demand. Germany sold almost 4 billion euros of bonds on Tuesday, while yields on six-month Italian paper sold at an auction turned negative for the first time since April.

($1 = 0.8749 euros) (Reporting by Dhara Ranasinghe Editing by Catherine Evans)