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(Adds statement from UK Debt Management Office)
LONDON, Nov 29 (Reuters) - Britain launched a new 40-year index-linked government bond offering the lowest ever inflation-adjusted return for a gilt sold via a syndicate of banks, the UK Debt Management Office said on Tuesday.
Reflecting strong demand among investors for inflation protection after June's decision by voters to leave the European Union, Britain sold 2.25 billion pounds ($2.8 billion) of the 0.125 percent index-linked gilt maturing in 2056 at a real yield of -1.466 percent, the DMO said.
The previous gilt to hold this record was the 2065 index-linked gilt sold via syndication in July, which offered a real yield of -1.325 percent, though shorter-dated linkers sold at auction since then have paid even lower returns to investors.
The sale attracted orders worth 11.7 billion pounds, and British investors accounted for 98 percent of demand, the DMO said.
"The bond provides much sought-after duration, an up-to-date coupon and a new maturity point in an area of strong interest from our core domestic investor base," DMO chief executive Robert Stheeman said.
Last week the DMO revised up its gilt issuance plans for the financial year to the end of March by 15 billion pounds after finance minister Philip Hammond said he would need to borrow more, partly due to June's vote to leave the European Union.
Stheeman told Reuters after this that the debt agency planned to issue bonds evenly across a wide range of maturities, rather than home in on one debt type.
Earlier on Tuesday, the DMO said investors had asked for the next syndication, which will take place in early January, to be a conventional gilt, probably the 2.5 percent 2065 bond and then for further issuance of the new 2056 linker or a 2065 inflation-linked bond in February.
The new 2056 bond sold at a yield 2 basis points higher than that of the 0.125 percent 2058 index-linked gilt, implying a price at the high end of the initial 2.0-2.75 basis point guidance, as is usual with gilt syndications.
Prices on British long-dated index-linked debt were down slightly on Tuesday, compared to slightly higher prices for conventional debt.
The 2058 index-linked gilt prices in an average rate of retail price inflation of 3.40 percent for the next 40 years - lower than in recent days but still close to its highest level since the bond's launch in July 2014.
Reuters data shows break-even inflation rates for benchmark 30-year index-linked gilts reached their highest in nearly three years earlier this month.
Bank of America/Merrill Lynch, Deutsche Bank, Morgan Stanley and Scotiabank acted as bookrunners for the sale. ($1 = 0.8019 pounds) (Reporting by William Schomberg and David Milliken; Editing by Hugh Lawson)