* Bunds rise after poor U.S. data
* Investors position for dovish ECB tone on Thursday
* Five-year German auction meets solid demand
By Marius Zaharia and Ana Nicolaci da Costa
LONDON, April 3 (Reuters) - Bunds rose on Wednesday after below-forecast U.S. economic data increased demand for low-risk assets, but investors refrained from putting on big bets before the European Central Bank's meeting on Thursday.
Analysts say the market had already positioned before Wednesday's session for ECB President Mario Draghi to possibly signal readiness to ease monetary policy further in the future.
But after a tight-ranged first half of the session, Bund prices got a lift - sending yields lower - from weak private sector jobs and non-manufacturing activity data in the United States.
German bond yields - the benchmark for the euro zone - are set for a blip, however, if the ECB does not meet the market's expectations.
"With that data it makes sense that (bonds of) core countries are searched for," said Norbert Wuthe, rate strategist at Bayerische Landesbank. "But I think markets will be disappointed tomorrow as ... they won't see more measures towards loosening monetary policy (from the ECB)."
Such speculation emerged because of the way the euro zone handled the Cyprus rescue process. The bailout deal was the first to include a levy on bank depositors, sparking fears of potential bank runs elsewhere in the euro zone.
The risk that the Cypriot crisis could have a wider impact on the region prompted some investors to bet that the ECB may seek to offer additional protection to peripheral markets by pointing to lower interest rates later this year.
However, the Cypriot crisis has so far had little impact on lower-rated euro zone bonds.
Ten-year Bund yields were last 1.5 basis points lower on the day at 1.29 percent, while Bund futures were 21 ticks higher at 145.45. Wuthe said that yields could rise to 1.32-1.35 percent if Draghi did not soften his tone at the meeting.
A sale of five-year German debt drew bids worth 1.9 times the amount allocated to investors, unchanged from a previous sale of similar paper in March, even though the yields on offer were lower this time around.
"Average yield continues to decline which is a reflection of the fact that investors are still prepared to put money into German government bonds despite the low yield," said Nick Stamenkovic, strategist at RIA Capital markets.
"That probably shows the niggling concerns about Cyprus and political uncertainty in Italy."
Lower-rated debt has proven relatively resilient in the face of concerns over the bailout in Cyprus and Italy's struggle to form a government, but the low yield level on German bonds is a sign that there is still demand for safety, analysts said.
The yield on the five-year bond was 1.3 basis points lower at 0.32 percent.
DZ Bank strategist Christian Lenk said he expected the economy to recover within the next two quarters and on that basis the five-year part of the curve was looking expensive.
"Especially in the belly of the curve, around the five-year seven-year (area), we expect a significant rise in yields," Lenk said. "For the Bobls (five-year German bonds) for example, we expect a rise in yields to 0.80 percent within about a quarter."