EURO-GOVT-Bunds up after Japan earthquake, Mideast unrest
* Bunds up after Japan quake, Mideast unrest
* Portugal yields rise ahead of summit
* Italian 5 bln bond auction seen going smoothly
LONDON, March 11 (Reuters) - German Bunds rose on Friday after a massive earthquake in Japan and as unrest in Saudi Arabia deepened Middle East and African concerns, while little relief is seen for the euro zone's struggling borrowers from a leaders' summit.
Yields on Greek, Portuguese and Spanish bonds are set to remain elevated with the meeting expected only to back a watered-down version of a German-French plan to boost competitiveness and fail to agree to widen the scope of the rescue fund. [ID:nLDE7290IP]
With the market braced for disappointment, analysts said comments from officials that progress was being made would not be enough to ease peripheral stress ahead of an European Union summit later this month.
"Investors are eager for details and numbers," said UniCredit MIB strategist Kornelius Purps.
"We will get comments that they are making progress today but investors are concerned about how countries are going to finance themselves in the next couple of years."
June Bund futures FGBLc1 were 23 ticks higher at 122.26.
The contract was testing the gap from the March 2 low of 122.25, with the next target to the upside the Feb. 24 high of 123.13.
"No one is going to want to be short going into the weekend in this environment," said a trader.
"And the periphery will stay under pressure. It's not a good environment for risk assets at all and the European Central Bank doesn't seem to be willing to step in."
Two-year bond yields DE2YT=TWEB were 3 basis points lower at 1.668 percent with 10-year yields DE10YT=TWEB down the same amount at 3.218 percent but around 20 bps lower than highs hit after last week's ECB meeting.
"Today there are temporary factors that are preventing yields from rising but in the medium-term we will go back to those post-ECB levels and even beyond," Purps said.
Portuguese bonds underperformed, with the 10-year spead over Bunds widening close to its highest since November at 452 bps.
The country's bond yields have soared to euro lifetime highs this week, reinforcing the view that the country will have to ask for an EU bailout, something the Austrian Finance Minister has urged Lisbon to decide on quickly [ID:nLDE72A0CJ].
There is also a chance it could see its ratings downgraded in the next week. Moody's -- which cut Greece and Spain this week -- also has Portugal on review for downgrade, a decision it said in December it would make by March 21.
Portugal's finance minister is due to make an announcement on the budget imminently. [nLDE7292R1]
ITALY TO SELL BONDS
Italy will sell up to 5 billion euros of 2015 IT465627= and 2026 IT464473= bonds [ID:nRME8EE7HD].
"Italy has been coming to the market without any particular worries, and we expect no different," said ING rate strategist Padhraic Garvey.
Commerzbank strategist Marcel Bross meanwhile, recommends switching Spanish government bonds into Italian BTPs with Spanish paper at its most expensive versus Italian paper since early last year after Spanish government bonds outperformed since Mid-December.
The 10-year spread between the two has narrowed around 40 bps to just over 50 bps since then, according to Tradeweb data, but the bank says this may be overdone, leading to a re-widening in coming weeks especially with the potential for disappointment from the upcoming EU meetings.
European shares fell as a huge 8.9 magnitude earthquake hit northeast Japan [ID:nL3E7EB0MF] and unrest in the Middle East intensified [ID:nLDE7292QY] although oil prices eased after a quiet start to a "day of rage" in Saudi Arabia [ID:nN11204294].
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