* Data supports Span-sh bonds before Thursday's debt sale
* Belgium slightly outperforms as 10-yr debt orders swell
By Emelia Sithole-Matarise and Marius Zaharia
LONDON, Jan 14 Spanish government bond yields dipped on Tuesday as data showing the economy grew at its fastest pace since 2008 in the last quarter of 2013 supported demand before debt sales this week.
Spain aims to raise up to 5.5 billion euros in a debt auction on Thursday after selling an above-target 5.3 billion euros of five- and 15-year bonds last week.
Spanish 10-year yields fell 1 basis point to 3.83 percent. Yields hit four-year lows below 3.8 percent last week. The fact that yields were falling before Thursday's sale was a significant achievement, analysts said.
Economy Minister Luis de Guindos said late on Monday that the Spanish economy probably grew by about 0.3 percent in the fourth quarter of 2013. This was the third quarterly expansion in a row and showed the euro zone's fourth largest economy was recovering more briskly than initially thought.
"The market likes that Spain left the (economic) trough behind," said David Schnautz, rate strategist at Commerzbank. "Unemployment is still about 25 percent...so overall challenges remain big but at least it's moving in the right direction."
Debt sales from the euro zone have come thick and fast this year. If this pace were maintained, it could cause some general indigestion in the market and slow or halt the debt rally in some of the peripheral countries, but it was unlikely to significantly weaken the bonds, analysts said.
"Obviously it's clear there will be some kind of correction in (Spanish yields) after we tested the 2009 lows...and ahead of the upcoming supply but there isn't a strong reversal yet," said KBC strategist Mathias van der Jeugt.
"Sentiment in general remains very good."
Demand for new issuance remains strong. Belgium issued 5 billion euros for a new 10 year bond via a syndicate of banks, with demand almost double that amount.
Latvia, which joined the euro this year, was set to raise 1 billion euros with a seven-year bond, with orders having reached around 4.5 billion before the launch.
Many in the market expect the Spanish sale to go smoothly after Italy sold a hefty 8.2 billion euros of 2016, 2021 and 2028 bonds on Monday, with funding costs over three years falling to a euro lifetime low.
"There has been quite a significant rally, which may prompt investors to take a little bit of profit but liquidity is supportive of the auctions," Gianluca Ziglio, head of fixed income research at Sunrise Brokers.
Madrid is hoping to capitalise on improved investor sentiment towards southern European countries to frontload a busy funding programme this year and many in the market expect it to launch a new 10-year benchmark later this month as it seeks to extend the maturity of its debt.
Spain is planning to sell 133.3 billion euros in medium- and long-term bonds this year, up from 128.4 billion in 2013.
Belgian bonds slightly outperformed in the euro zone market as its 10-year debt offer drew strong demand.
Belgian 10-year yields were 3 bps lower in the secondary market at 2.44 percent while German Bund yields , the euro zone benchmark, were flat on the day at 1.82 percent.