(Updates with confirmation of sale; changes source to NTMA, adds quote) DUBLIN, April 15 (Reuters) - Ireland raised 3.5 billion euros from the sale of a new 20-year bond on Thursday, the country’s debt agency said, in the latest long-dated issuance from a euro zone sovereign. That is slightly higher than the 2 billion to 3 billion euro target a source indicated to Reuters on Wednesday, with the deal receiving final investor demand of more than 35 billion euros. The funds were raised at a yield of 0.585%, the National Treasury Management Agency (NTMA) said in a statement. Ireland has now raised 10.5 billion euros in 2021, more than half of which came via its first syndicated sale of the year, a 10-year deal investors piled into in January when the order book was in excess of 40 billion euros. It plans to borrow 16 billion to 20 billion euros in 2021 to fund a huge increase in government spending to keep businesses and employees afloat during the COVID-19 pandemic. This will lead to a budget deficit of 4.7% of gross domestic product (GDP) this year, the finance ministry forecast on Wednesday. “Today’s transaction underlines the continued strong demand from a broad investor base for Irish sovereign debt” and provides “significant flexibility” in meeting borrowing requirements over the rest of the year, NTMA Director of Funding Frank O’Connor said in a statement Thursday’s issue is the longest dated sale Ireland has placed via a syndicate of banks in almost two years and follows hot on the heels of 50- and 15-year sales from Austria and Spain earlier this week. Long-dated issuance has resurfaced after dying down in February when the bond sell-off driven by growth and inflation expectations hit longer-dated bonds particularly hard, as they are more sensitive to a rise in underlying rates. Bond yields move inversely with prices. The NTMA said the use of long-dated bonds allowed it to lock in the benefits of low rates and provide greater certainty over future debt servicing costs. The agency mandated Barclays, BNP Paribas, Cantor Fitzgerald Ireland, Danske Bank, J.P. Morgan and Nomura as joint lead managers for the sale. It is the first syndicated deal since the debt agency dropped Ireland’s largest stockbroker, Davy Stockbrokers, as a primary dealer in Irish government bonds following a record central bank fine for breaching market rules. ($1 = 0.8344 euros) (Reporting by Padraic Halpin and Conor Humphries in Dublin and Yoruk Bahceli in Amsterdam; Editing by Mark Potter and Jonathan Oatis)