* Peripheral yields dip amid Ukraine tensions
* Bunds sell off, confounding expectations
* Ireland, Spain mull liability management plans
LONDON, April 16 (Reuters) - Italian and Spanish yields dipped on Wednesday morning, offering a combination of relatively safe and high returns that continued to attract investors with one eye on the developing crisis in Ukraine.
Italian yields nudged back near record lows while Spanish paper was at 8-1/2-year lows. Both are likely to benefit from any asset purchase programme the European Central Bank might introduce.
In the latest twist in Ukraine, government forces launched an anti-terrorist operation against separatist militia in the Russian-speaking East.
"We have coined Spain and Italy the safe 'pick-up' havens... It expresses the idea that they are no longer seen as risky assets but rather in line with the other core euro zone bond markets," said Michael Leister, an analyst at Commerzbank.
The countries' 10-year yields both dipped 1 basis point, to 3.11 percent and 3.09 percent respectively, while their Portuguese equivalents dipped 5 bp to 3.84 percent. German Bund yields rose 2 bps to 1.49 percent.
Foreign investors who shunned peripheral countries at the depths of the sovereign debt crisis are now much more optimistic about their prospects.
"At least in the case of Spain, the market is responding to the correction of the (economic) imbalances, the reform effort and the results in fiscal consolidation," Pablo de Ramon-Laca, head of funding at the Spanish treasury, told Reuters on Tuesday.
While the Italian government's reform agenda came under fire this week - prompting reminders from the European Commission on its commitment to balance its budget - it has had little problem attracting investment.
Data from the Bank of Italy showed that foreign investors are returning en masse, while a sale of inflation-linked bonds to domestic retail investors will close early on Wednesday after orders approached 10 billion euros.
Cheap market funding is allowing sovereign debt managers to dedicate more time to managing their debt profiles, using such things as bond switches and buy backs to sooth investor worries about their abilities to meet hefty repayments in years ahead.
Ireland is considering offering investors the opportunity to switch out of a 10 billion euro bond maturing in April 2016 for a longer-term bond. It used an similar exercise late last year to buy back over 4 billion euros of a bond maturing in January 2014.
Spain, which is the only peripheral country not to have taken such measures in recent years, is also such options.
More than half of Spain's 914 billion euro ($1.26 trillion)debt matures within the next four years, according to Thomson Reuters data. (Editing by John Stonestreet)