EURO GOVT-ECB bond buying pushes Italian, Spanish yields lower
* ECB buys Spanish,Italian bonds-traders
* Bunds volatile on recession worries
* Investors eye U.S. Fed meeting
LONDON, Aug 9 (Reuters) - Italian and Spanish bond yields fell for a second day on Tuesday as the European Central Bank was seen stepping in again to scoop up those bonds, with analysts urging the bank to keep up its purchases or even do more to keep yields at sustainable levels.
Yields on both sovereigns headed down towards 5 percent, supported by the ECB bond buying which began on Monday after a spike in yields last week triggered concern the euro zone's third and fourth largest economies would soon be shut out of commercial markets.
Market estimates of the scale of ECB buying over the past two days varied with conservative estimates as low as 3.5 billion euros, while some said as much as 9 billion had been purchased. Traders said buying had been focused in the five- to 10-year maturities.
"The ECB will try to guarantee that the market for Italian and Spanish bonds is somehow under control until the EFSF (euro zone rescue fund) is operational," said Kornelius Purps, fixed income strategist at UniCredit.
"But the ECB might have to put more money on the table."
Fund managers estimated the ECB would need to buy at least 100 billion euros ($142 billion) of Spanish and Italian bonds to shore up the stricken euro zone and calm the markets, a Reuters poll showed.
Ten-year Italian bond yields fell 14.2 basis points to 5.19 percent and the Spanish equivalent shed 12 basis points to 5.09 percent, off euro-era highs hit last week above 6 percent.
"We have seen enquiries and we have dealt with them (central banks)," one trader said. Another said that buying was focused more heavily on Italian paper than Spanish.
Analysts said the ECB had to be consistent with its bond buying to keep yields from rising again.
"It still remains to be seen how credible the ECB is this time round and how sustained they are in terms of their purchases, and we wouldn't exclude for the whole thing to turn around again," said WestLB rate strategist Michael Leister.
Ten-year French bonds were under pressure with yields rising 9.4 percent to 3.24 percent even after reassuring comments from Standard & Poor's.
S&P does not expect to downgrade its AAA rating on France within the next two years, the head of the credit agency's European sovereign ratings unit told a German newspaper on Tuesday.
"At the end of the day Italy and Spain are out of the game so we'll be looking at Belgium and France next -- the ones without protection," a third trader said.
Attention turned to a U.S. Federal Reserve monetary policy meeting on Tuesday, with investors hoping the U.S. central bank will say something to calm financial markets, after stocks took a thumping in recent sessions.
"They can't just ignore equity moves like this, they will try and be as upbeat on growth as they can ... but I don't think you're really going to see much beyond the 'lower-for-longer' (rates) emphasis," said Lloyds Bank strategist Charles Diebel.
On Tuesday, world stocks picked up after a 10-day rout, taking the shine off safe-haven German bonds, but are likely to remain volatile. .
The German Bund future FGBLc1 settled at 132.41, down 67 ticks on the day. (Editing by Susan Fenton)