* Italian, Spanish bond yields fall as ECB intervenes in the market
* Contagion fears, money market stress ups need for bold action
* Bunds hit session low on renewed talk of ECB lending to IMF
LONDON, Nov 18 (Reuters) - German Bund futures fell on Friday on speculation the European Central Bank could lend money to the IMF to bail out bigger euro zone economies, although ECB officials and Germany continued to resist pressure for the bank to play a bigger anti-crisis role.
The speculation coincided with a sharper move lower in Italian and Spanish yields after they came off the day's highs as the ECB intervened in the secondary market.
News agency Dow Jones reported that talks on ECB lending to the International Monetary Fund may start soon and that Germany and the ECB were still opposed to the idea but may be willing to consider it, citing sources.
"Within the article, it did say the ECB are actually opposed to the idea and Germany, so it doesn't really make sense why we are selling off on it, but the fact of the matter is we are. People look at headlines," one trader said.
The German Bund future was down 56 ticks on the day at 136.76, but analysts say there will continue to be demand for safe-haven debt as long as euro zone policymakers do not come up with a big-bang solution to the debt crisis.
AUSTERITY IS INSUFFICIENT
Italian Prime Minister Mario Monti comfortably won a vote of confidence in his new government on Thursday after promising rigour and fairness in painful reforms to dig the country out of a financial crisis that threatens the entire euro zone.
But many in markets say austerity measures alone will not be enough to contain the debt crisis, putting pressure on the ECB to tide the region over with bond purchases until policymakers can agree on more effective action .
Italian 10-year government bond yields fell 19 basis points to 6.7 percent having earlier stood close to unsustainable levels at 6.98 percent. One trader cited ECB buying in the five- to 10-year part of the curve.
Spanish 10-year yields were 8.4 basis points lower on the day at 6.43 percent, having earlier hit a high for the day at 6.55 percent.
The gap between Italian and Spanish yields has narrowed in recent sessions -- a development one analyst said showed the crisis was escalating.
The yields are likely to converge further with Spanish yields set to jump as the January 2022 bond sold on Thursday becomes the new benchmark at that maturity.
"It's symptomatic of the fact that one individual country can't influence this now, it's a systemic issue," Lyn Graham-Taylor, rate strategist at Rabobank, said.
"We all know that Spain has better fundamentals than Italy but now the market is just viewing them as ... the same risk."
The ECB is reluctant to take on a bigger role for fear of undermining its independence from politics and its price stability mandate when euro zone inflation is at 3 percent -- above its target of just below 2 percent.
A German newspaper reported the ECB had secretly imposed a weekly limit of about 20 billion euros ($27 billion) on its euro zone sovereign bond-buying programme.
ECB chief Mario Draghi told euro zone governments on Friday to act fast to get their EFSF rescue fund up and running, showing exasperation at their slow progress.
Other senior ECB policymakers joined Draghi in pushing the governments to act, saying the central bank should be asked to go beyond its inflation-busting mandate.
Bond strategists in a Reuters poll saw an even chance of a bigger role for the ECB. The 50 analysts surveyed gave a median 48 percent probability the ECB will be forced to adopt a policy of quantitative easing while a slim majority bet it could become a lender of last resort.