UPDATE 1-German 10-year bond auction a 'disaster'

LONDON Nov 23 (Reuters) - One of Germany's worst bond sales since the launch of the euro prompted concerns the debt crisis was even beginning to threaten Berlin on Wednesday, with the Bundesbank forced to buy large amounts of the bonds to ensure the auction did not fail.

The low yields offered on the 10-year paper deterred investors from the auction, especially because of growing concerns over the cost to Germany of the escalating crisis.

That meant the central bank had to pick up 39 percent of the 6 billion euros of debt Germany had hoped to sell to investors after banks bought just 3.644 billion euros of the issue.

"It is a complete and utter disaster," said Marc Ostwald, strategist at Monument Securities in London.

"This does not bode well, it is the worst of uncovered auctions that we've had this year and little wonder that the Bund sold off on the back of it."

German Bund futures, the euro and European stocks fell after the announcement of the auction results.

The country's debt agency said the shortfall in the sale reflected worsening market nerves on European debt markets but added it would sell back the retained amount to investors on secondary debt markets and that Germany would not face a funding bottleneck.

The results compared with an average retention by the central bank of 17.83 percent at 10-year bond auctions in 2011. Data from IFR, a Thomson Reuters service, showed this to be the highest Bundesbank retention since at least July 1999.