German Bunds dip as markets still see imminent Fed tapering
* Bund yields edge up after Friday's sharp fall
* Italian Senate starts considering Berlusconi expulsion
* Analysts see Spanish yields falling below Italian ones
By Marius Zaharia and Ana Nicolaci da Costa
LONDON, Sept 9 (Reuters) - German government bonds dipped on Monday, after sharp gains on Friday made on below-forecast U.S. jobs data, as investors continued to bet on the U.S. Federal Reserve trimming monetary stimulus this month.
Italian bonds eased as a special Italian Senate committee met to consider expelling former premier Silvio Berlusconi from parliament, a move that would threaten the country's fragile left-right coalition.
Last week's non-farm payrolls report added an element of uncertainty to expectations that the U.S. central bank will move to trim its bond buying at its Sept 17-18 meeting.
But 13 of 18 primary dealers in a Reuters poll taken on Friday after the data said the Fed will still decide to start reducing stimulus this month. That was up from nine dealers a month ago. The median of forecasts was for a cut of $15 billion per month, down from $18 billion in the August poll.
"What happened on Friday doesn't change the big picture," ING rate strategist Alessandro Giansanti said. "The big picture is that the Fed will reduce the amount of liquidity in the market ... and the risk is still towards higher (yields)."
Bund futures settled 7 ticks lower at 137.62. Ten-year German 10-year Bund yields rose 1.7 basis points to 1.96 percent.
Bund yields had risen to a 1-1/2 year high of 2.059 percent before the U.S. payrolls number on Friday, one day after the ECB signalled no imminent action to curb rising market rates.
But some analysts said the downside for Bunds was limited over the short-term given the extent of the recent sell-off and as concerns over potential conflict with Syria underpin safe-haven assets.
"You have got to bear in mind that clearly we've had a significant sell-off in the last few weeks and obviously you have got the whole Syria (situation) potentially bubbling in the States and the vote is due this week, so that might lead to a little bit of a pause in the uptrend in yields," said Phillip Tyson, strategist at ICAP.
Ten-year German yields are up some 80 basis points from this year's lows.
President Barack Obama is seeking support from Congress for punitive military action against Syria over a suspected chemical weapons attack, and votes could come as early as this week.
ING's Giansanti said supply pressure from bond sales in the Netherlands and Germany later this week also weighed on Bunds.
Italian yields rose as they remained vulnerable to political risks and analysts expected them to soon rise above Spain's.
"Italian political wobbles are definitely there in play ... We like Spain for choice - it is a bit more stable at this moment in time," one trader said.
Commerzbank and Credit Agricole rate strategists also recommended investors to bet on Spain outperforming Italy, which is due to sell bonds on Thursday.
At 4.52 percent, Italian 10-year yields were only 2 basis points below the Spanish ones.
"This has been quite a crowded trade, but it can continue," said Marius Daheim, chief strategist at Bayerische Landesbank, adding that Spanish yields could fall 13-15 bps below Italy's.
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