EURO GOVT-Bunds higher, periphery in firing line

LONDON Nov 30 (Reuters) - German government bonds opened higher on Tuesday, supported by concerns about the euro zone's debt crisis after an 85 billion euro rescue package for Ireland failed to stop the rot in peripheral bond markets. With the market quickly switching its attention to the question of who's next, Portugal and Spain came under pressure on Monday and a lacklustre Italian auction further reflected the concerns. Italian and Spanish 10-year yields posted their biggest daily rises in more than a decade.

"It could be the death spiral of the euro zone. The way Spain, Italy and Belgium got attacked yesterday was brutal," said a trader.

"Volumes were thin, but they were all one way."

At 0704 GMT, December Bund futures FGBLZ0 were 22 ticks higher at 127.29.

Any safe-haven bid for Bunds has been limited in recent weeks with the prospect of further expensive bailouts set to increase the burden on Germany.

"It's all eyes on the European Central Bank now," the trader said.

"But they're not giving any indication they're going to help out, buying Spanish and Italian debt is one of the few cards they've got left."

Two-year bond yields DE2YT=TWEB were down 1.6 basis points at 0.904 percent, with 10-year yields DE10YT=TWEB down 2 bps at 2.678 percent.

The flash reading of euro zone inflation for November is due at 1000 GMT, and forecast to rise to 1.9 percent, in line with the European Central Bank's target.

Otherwise the data focus is on the U.S. with manufacturing and consumer confidence numbers due [MI/DIARY].