COLOMBO, April 8 (Reuters) - Sri Lanka sold a US$500 million (S$630 million), five-year sovereign bond at a yield of 5.125 per cent, the island nation's central bank said on Tuesday.

It was the second eurobond the US$67 billion economy sold this year. In January, it sold US$1 billion, five-year sovereign bond at a yield of 6 per cent.

The Indian Ocean island nation's 2014 budget approved a US$1.5 billion overseas borrowing to finance some infrastructure projects.

The latest bond issue, the seventh by Sri Lanka since the first eurobond in 2007, was priced at a yield of 5.125 per cent after a 5.5 per cent initial price guidance.

"This tighter yield reflects the continued confidence that international investors have placed in the sovereign bond issuance of Sri Lanka," the central bank said in a statement.

Citigroup, HSBC, and Standard Chartered Bank were the joint lead managers and bookrunners for the bond issue, which was oversubscribed by 8.3 times.

Sri Lanka's previous five-year issuances in 2007, 2009 and January 2014 were priced at yields of 8.25 per cent, 7.40 per cent and 6.00 per cent respectively.