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* Bunds hit contract high as growth concerns lend support * Portugal seen at risk, auctions weigh on Spain, Italy * New long-term Greek bonds have highest yield in euro zone By William James LONDON, March 12 (Reuters) - Rising demand for German debt showed no sign of easing on Monday in the aftermath of Greece's huge debt restructuring while bonds issued by peripheral states faced fresh pressure as the focus turned to a weak economic outlook. Bund futures hit a contract high of 138.95, up 47 ticks on the day, as investor attention turned to whether fragile growth could derail debt-laden Portugal's progress and reignite latent concerns about Spain and Italy. Ten-year German yields hit a two-month low of 1.75 percent, down 5.5 bps on the day as demand for triple-A rated debt remained high. "Bunds don't want to lie down. We're now going to have a look at Portugal and then Spain; we're moving on to bigger growth concerns," a trader said. On Friday, Greece took the final steps towards slicing around 100 billion euros off its public debt, using legislation to force remaining private creditors to swap their Greek debt for new bonds worth considerably less. The new Greek bonds started trading on Monday and remained the highest-yielding long-term debt in the currency bloc - highlighting scepticism that Greece's problems were over. The bond exchange paves the way for Greece to receive the bailout funding it needs to avoid a disorderly default. Euro zone finance ministers were expected to sign off on the 130 billion euro package on Monday. While this removed one source of risk from the market, investors remained reluctant to buy into higher-yielding euro zone bonds. Portuguese yields rose across the curve. Portugal is seen as the next weakest link behind Greece and remained most vulnerable to a fresh wave of selling in peripheral debt markets. The 10-year yield rose 12 basis points to 13.94 percent. "Our view on fundamentals is nowhere near as bearish as the market is... but we've got to concede that the market has quite a lot of power here. If some sellers turn up then there doesn't appear to be much to stop spreads from widening," said Peter Chatwell, strategist at Credit Agricole in London. Spanish 10-year yields rose 5.4 bps on the day to 5.06 percent, while their Italian equivalent was 8 bps higher at 4.92 percent. Both countries will issue debt later this week and although the sales were expected to pass off smoothly, they added to upward pressure on yields. Yields on core government debt have stayed close to record lows all year, with the return on German 10-year bonds topping 2 percent for only one day. "That's testimony to the underlying investor caution over the medium-term Greek picture and the outlook for the global economy," said Nick Stamenkovic, strategist at RIA Capital Markets in Edinburgh. NEW BONDS, SAME CONCERNS Following the debt swap, Greece issued 20 new bonds to its investors on Monday, with early pricing showing bid yields between 18.77 percent on the shortest duration debt maturing in 2023 and 13.4 percent on the 2042. The new 2023 bond carried a 470 bps yield premium over comparable debt from Portugal. Analysts said this reflected the investor view that Greece faces an uphill struggle to meet the terms of its bailout and was likely to need further debt restructuring. Late on Friday, the International Swaps and Derivatives Association concluded that the Greek debt swap constituted a credit event and would trigger payment on credit default swap (CDS) insurance contracts. Latest data from the Depository Trust and Clearing Corporation showed the maximum net CDS payout was $3.16 billion, with the actual payout likely to be lower depending on the outcome of an auction procedure scheduled for March 19.