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UPDATE 1-FMCC sells 1.5 billion euro three-year bond

(Adds byline, background, analyst comment, bond price)

By Alex Clelland

LONDON, April 23 (Reuters) - Ford Motor Credit Company (FMCC), the finance arm of Ford Motor Co , launched a 1.5 billion euro three-year bond on Wednesday, increased from initial plans for a one billion euro sale.

FMCC priced the bond, which carries a 5.5 percent coupon and matures on May 2, 2006, to yield 277.354 basis points over the OBL 137 German government bond.

As well as increasing the size of the transaction, FMCC also lowered the yield on offer to investors, reflecting the strength of demand for the deal.

Credit Lyonnais, Deutsche Bank and UBS Warburg are lead managers on the deal.

FMCC last tapped the debt market in January with a 1.5 billion euro 6.75 percent bond due January 14, 2008.

ING credit strategists said in a briefing note that the new deal had been well received in the market.

Although it offers less of a new issue premium than the transaction sold in January, ING said the premium of 25 basis points offered by the new deal is still attractive.

Ford surprised markets last Wednesday by posting first quarter earnings of $896 million, well above analysts' estimates as cost cuts and better earnings from its finance arm helped offset lower sales.

Euro bonds issued by Ford and peer General Motors have rebounded from a hammering taken in early March after GM said its second-quarter production estimate was 10 percent below last year's results.

Ford's 6.75 percent euro bond due January 2008 was yielding an average 264 basis points over government bonds by 1623 GMT on Wednesday, 0.9 basis points less on the day.

Ford said earlier in the year its finance arm planned to sell as much as 41 percent less long-term debt in 2003 than planned after a year in which bond investors grew less willing to hold big stakes in major issuers.

Ford Credit plans to sell between $7 billion and $10 billion of term debt this year and between $12 billion and $15 billion of securitised debt.

FMCC is rated A3 by Moody's Investors Service, BBB by Standard & Poor's credit ratings agency and BBB+ by Fitch Ratings.