By Christopher Whittall and Jason Douglas 

Bumper demand for a multibillion pound sale of U.K. government debt issued on Tuesday and a sharp rally in sterling, appeared to show that investors are more relaxed about Britain's June vote on its membership of the European Union.

The GBP4.75 billion ($6.9 billion) debt sale attracted GBP21 billion of orders, according to a notice released on Tuesday by banks underwriting the deal. The pound, meanwhile, rose 1% against the dollar on the day, reaching its highest level against the greenback since early February. The currency rallied as recent opinion polls showed the U.K. leaning toward a vote to stay in the EU.

Concern that a British vote to leave the EU, the so-called Brexit, would hit the British economy has pushed the pound down 1.3% against the dollar and around 5% against the euro this year.

"As the odds of Brexit have fallen, sterling has outperformed," said Mike Riddell, a portfolio manager at Allianz Global Investors, who said the British pound has been the best performing currency in global markets over the past five days.

Still, the pound has rebounded before and come back down again as the prospect of a possible Brexit increased.

But trading in government debt and the country's main equity market has been mainly unaffected by speculation over Brexit. On Tuesday, bond investors showed on Tuesday they mainly remain unperturbed about the coming vote, jumping into the sale of government debt, also known as gilts.

Bond investors have been divided on what they believe will be the impact of the vote on gilts. Foreign investors sold debt securities at the start of the year, but that has been offset by domestic buying.

In Tuesday's sale, the government's financing arm, the U.K. Debt Management Office, doubled the size of an existing GBP4.75 billion bond issue that pays an interest rate of 2.5% and matures in 2065, according to the deal notice. The bonds sold at the lower end of initial guidance levels provided by underwriting banks, according to the deal notice, at a yield of 2.29%.

U.K. government bonds have gained with a global rally in sovereign debt in 2016. Rising prices have pushed the yield on 10-year gilts around 0.3 percentage point lower to 1.65% this year. Government debt rallied at the start of the year as investors looked for safety amid an uncertain global outlook.

Still, yields have ticked up from a recent low of 1.32% on April 7, with investors now reassessing their outlook on the global economy.

Proponents of the U.K. staying in the EU say an exit would badly damage the U.K.'s economy by hitting its trading relationships with the rest of the world and making Britain a less attractive place for foreigners to invest in. Those calling for a Brexit, say that the U.K. economy will thrive, freed of EU regulation, and that new trade agreements will be agreed.

The gilt sale comes ahead of a report due Wednesday that is expected to show the U.K. economy lost momentum in the first quarter, after growing in 2015 at the second-fastest pace among the Group of Seven leading economies, after the U.S. A renewed manufacturing slump as well as uncertainty over the outcome of June's referendum are both weighing on growth, economists say.

Officials at the Bank of England, led by Gov. Mark Carney, have warned that the economy could slow further in the months ahead as doubts about Britain's future in Europe intensify. The BOE's rate-setting Monetary Policy Committee in April highlighted a range of potential vulnerabilities to referendum jitters, including hiring, business investment, real-estate transactions and consumer spending.

Citigroup Inc., Deutsche Bank AG, HSBC PLC and J.P. Morgan Chase & Co. are underwriting the deal.

Write to Christopher Whittall at christopher.whittall@wsj.com and Jason Douglas at jason.douglas@wsj.com

(END) Dow Jones Newswires

April 26, 2016 10:56 ET (14:56 GMT)