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UPDATE 1-Spanish bonds shine after record demand at 10-year bond sale

Dhara Ranasinghe

* Euro zone bond yields dip, Spain outperforms

* Strong demand for Spain's new 10-year bond

* German investor morale brightens in Jan

* Euro zone periphery govt bond yields (Updates throughout, adds Spain details, ZEW survey)

LONDON, Jan 22 (Reuters) - Spain's bond market outperformed most of its euro zone peers on Tuesday after a new 10-year bond, sold via a syndicate of banks, attracted record demand.

Euro zone bond yields more generally drifted off their lows after news that German investor morale brightened unexpectedly in January, although worries over world economic growth, trade tension and a Brexit impasse continued to underpin the market.

In contrast, Spain's 10-year bond yields were down 1.5 basis points at 1.36 percent and near recent six-month lows.

Spain has attracted 50 billion euros of orders for its new 10-year syndicated bond issue, a record for any bond sale by the sovereign, lead managers for the transaction said.

The deal is the latest in a string of solid government bond sales sold via a syndication, easing concerns about an absence of buyers for euro zone debt after the European Central Bank's decision to end its bond-buying stimulus scheme last month.

Italy last week raised 10 billion euros in its biggest syndicated bond sale.

"The Spanish bond sale shows there was some cash on the sidelines being put to work," said Martin van Vliet, a senior rates strategist at ING. "What we see typically in recent years is that investors prefer to wait for these new deals to come through before putting that cash to work."

Outside Spain, euro zone bond yields fell as much as 3 basis points in early trade as markets digested overnight headlines before drifting higher.

Germany's 10-year bond yield was last down just 0.5 bps at 0.26 percent, holding below Friday's one-month high close to 0.28 percent.

The mood among German investors improved for the third consecutive month in January, a ZEW research institute survey showed, suggesting that the growth prospects of Europe's largest economy are slowly brightening.

Markets are increasingly convinced that stuttering growth at home and abroad means the European Central Bank will maintain a dovish stance when it meets on Thursday.

Data on Monday showing China's economic growth slowed to a 28-year low in 2018 were followed by the International Monetary Fund's trimming its 2019 and 2020 world growth forecasts.

Brexit uncertainty and concern about the U.S./China trade war after U.S. President Donald Trump called on China to seek a "real deal" added to the risk-off sentiment and boosted safe-haven debt on Tuesday.

Francois Savary, CIO at wealth manager Prime Partners, still expects the ECB to raise rates by the end of the year, despite signs that doubts are growing among policymakers.

"Clearly the ECB is asking itself if they really need to proceed with an interest rate hike," Savary said. "(ECB President Mario) Draghi has been clear that he wants to be more flexible and more slow in the way they assess monetary policy."

Euro zone money markets price roughly a 50 percent chance the ECB will raise its deposit rate by 10 basis points by the end of this year. It is now minus 0.40 percent.

(Reporting by Dhara Ranasinghe, Editing by Catherine Evans)