CORRECTED - UPDATE 1-Euro zone bond yield spreads widen to record levels

(Corrects prices in last paragraph and second last paragraph to show CDS for some euro zone sovereigns widened)

* Bond yield spreads within euro zone widen to record levels

* Ratings warnings boost demand for German government bonds

* Falling shares prop up broader bond market, ECB eyed

(Updates with market prices, context, quotes, background)

By Emelia Sithole-Matarise

LONDON, Jan 13 (Reuters) - The premium that most euro zone government bonds offer over German Bunds soared on Tuesday to the highest since at least 1999 following warnings on the credit rating outlook for three euro zone countries.

Standard & Poor said on Friday and Monday that Spain, Greece and Ireland's ratings were under threat as the global crisis strains public finances -- sparking concern that others, such as Portugal and Belgium, may be under fire next.

With euro zone governments needing to raise hundreds of billions of euros to fund stimulus plans, and new government paper worth 20 billion euros ($26.81 billion) on offer this week alone, investors took refuge in more liquid German debt.

Ten-year Portuguese, French, Belgian, Greek, Spanish and Dutch bonds yielded the most over Bunds since at least 1999, when the euro was created, according to Reuters charts.

"The main issue is the announcement by S&P that Spain was going to be downgraded. That led to a sharp widening of spreads versus Germany in the 10-year sector," said Nick Stamenkovic, fixed income strategist at RIA Capital Markets. "Peripheral markets are under pressure and, in an environment where investors lack risk appetite, Bunds are the safest choice."

The 10-year Portuguese/Bund yield spread hit 109 basis points, Greek/Bund spreads blew out to 243 basis points, the Belgian/Bund spread widened to 93.6 basis points and even the spread between French and German bonds -- which had been wiped out only a few years ago -- was at 58.4 basis points.

Finland, once regarded as the euro zone country with the healthiest government balance sheet, found its bond yields offering a record premium of 77 basis points over Bunds.

The Dutch spread also hit its widest, at 70 basis points -- just before the Netherlands sold 3.275 billion euros of new 2.5 percent January 2012 bonds, near the top of a 2.5-3.5 billion euro target.

Strategists at Calyon said the potential for further warnings by S&P within the euro zone was "less obvious" but they did not rule out similar announcements by ratings agency Moody's.

"The disadvantage for euro sovereigns during this crisis is is the ECB's inability to print money and attempt to reflate its way out of the current difficulty, which differs from the UK and U.S.," said Orlando Green, interest rate strategist at Calyon.

While German government bonds were the best performers in the euro zone, bond prices were broadly higher as European shares .FTEU3 lost ground for a fifth straight session and against the backdrop of expectations that the European Central Bank would cut interest rates from 2.5 percent on Thursday.

At 0956 GMT, March Bund futures FGBLc1 were five ticks up at 125.19 from Monday's settlement close on meagre volumes of 150,000 lots traded.

The two-year Schatz, which is most sensitive to shifts in interest rate expectations, yielded 1.501 percent EU2YT=RR, down slightly from late Monday trade. Ten-year Bund yields were unchanged at 2.992 percent EU10YT=RR.

Meanwhile, the cost of protecting some euro zone sovereign debt against default grew from the New York close, according to data provider CMA Datavision.

The five-year credit default swap of Spain, for example, was unchanged at 106.6 basis points but Greece widened to 231 basis points from 222.9 basis points and that of Ireland rose to 189.3 basis points from 184 basis points.

(Reporting by Emelia Sithole-Matarise, editing by Swaha Pattanaik and David Stamp)