Jan 17 (Reuters) - European debt placements have had their fastest start to a year on record as governments and financial institutions take advantage of falling borrowing costs from multi-year highs.

Issuers raised €170 billion ($184 billion) in the first two weeks of 2023 with sales of euro and sterling bonds, Refinitiv data showed, the most sold in this period on record since 2000.

The sharp fall in gas prices, hopes that inflation is bottoming out and that the recession is milder than expected have boosted confidence.

Borrowing costs, which recorded their highest rise in 2022, have fallen sharply in January. German 10-year bond yields are down nearly 40 basis points, posting their biggest monthly drop since July.

Yields on euro investment-grade corporate bonds are down 30 basis points and the cost of insuring exposure to below-investment-grade debt has touched the lowest level since April

"This huge amount of debt suggests to me that markets are in good shape and that there is strong demand for fixed income," said Chris Iggo, chief investment officer at AXA Investment Managers.

Behind this record is a sharp increase in debt placements by financial institutions. Heavy debt sales by banks such as Santander and Société Générale prompted the issuance of 52 billion euros in the first two weeks of the year, twice as much as in 2022.

Analysts consulted noted that as banks issue debt more frequently to fund their balance sheets, they have more incentive to take advantage of falling yields.

Corporate issuance fell 33% to €20 billion, according to Refinitiv data.

Companies, which issue debt less frequently, may be discouraged by higher market borrowing costs relative to what they pay for their outstanding debt, analysts said.

Governments and other public sector borrowers placed €69 billion of syndicated debt sold directly to end-investors, just below the 2020 record, according to Refinitiv data.

Portugal, Ireland, Austria and Belgium launched their deals earlier than last year.

"The market was very well positioned to receive all the early supply of 2023," said Maric Post, head of the Belgian debt agency, which saw near-record demand for 10-year bonds.

"We knew our pricing was quite attractive (to investors)," Post added, noting that yields are at their highest level in years.

Government bonds have posted inflows over the past seven weeks, while investment-grade corporate bonds posted their highest inflows since July 2021 in the week through Wednesday, according to BofA, which relies on EPFR data.

"Despite this record level of issuance, we're still seeing a tightening of spreads. That's quite unusual," said David Arnaud, fund manager at Canada Life Asset Management.

($1 = €0.9246)

(Reporting by Yoruk Bahceli, additional information by Chiara Elisei; edited in Spanish by Flora Gómez)