* Political stability worries hit Italian, Spanish debt * Periphery seen vulnerable to more selling * Bund futures meet resistance at 143.11 By Marius Zaharia and Ana Nicolaci da Costa LONDON, Feb 11 (Reuters) - Italian and Spanish bond yields rose on Monday and were seen rising further on fears that Italian elections this month will produce an inconclusive result and worries about a corruption scandal in Madrid. Renewed political uncertainty is prompting investors to book profits on a six-month rally in peripheral debt that started when the European Central Bank announced its new bond-buying programme, which can be activated if a country seeks a bailout. In Italy, a powerful fight-back by former Prime Minister Silvio Berlusconi in opinion polls has raised concerns the poll will produce a fragmented parliament. That could hamper the government's ability to push through structural reforms needed to cut the country's massive 2 trillion euro debt pile. "There is some nervousness ahead of Italian elections. Investors are reducing some of (their) positions as we seem to be heading towards an increasingly inconclusive result," Societe Generale rate strategist Ciaran O'Hagan said. Italian 10-year bond yields were last 5 basis points higher at 4.62 percent, having risen by about 30 basis points in February. The cost to insure Italian government debt against default was steady at 266 basis points, but Italian corporates were among the worst performers in European credit default swaps markets, according to data firm Markit. The final polls before the Feb 24-25 vote showed the centre-left is on course to win it, but it is likely to have to form a coalition with technocrat outgoing Prime Minister Mario Monti. That outcome was not necessarily the worst for investors, who have praised Monti's achievements at Italy's helm. The scenario investors seem to be positioning for even though it may not be the most likely one is a hung parliament, O'Hagan said. Citigroup strategist Alessandro Tentori also saw the sell-off continuing "because we are still not pricing in correctly, or to the full extent, the Italian political risk". In Spain, Prime Minister Mariano Rajoy faced calls to step down over corruption allegations - which he denies - raising worries that if the government loses popular support it may deviate from its reform plans. Ten-year Spanish bond yields were up 6 bps at 5.44 percent, some 35 bps higher than at the end of last month. The recent sell-off in Spanish debt is likely to be only a slight correction after a long rally rather than a new flight out of Spain, Rabobank strategists said in a note. Risks that Rajoy will have to step down are more "to be aware of rather than beware of", they added. BUNDS Meanwhile, yields on German bunds, the low-risk benchmark for the euro zone, are trading at levels seen before banks started to repay their long-term crisis loans to the European Central Bank. Ten-year paper now yields about 1.60 percent, having spiked above 1.70 percent earlier this month when investors worried the excess liquidity in the euro zone banking system may evaporate faster than initially thought. The higher than expected repayments prompted a rise in money market rates late last month which also trickled through into longer-dated German debt. Draghi sought to play down such concerns after the ECB's monthly meeting on Thursday, saying he will monitor money markets closely. His comments triggered a fall in short-term rates and a rebound in Bunds. Bund futures were last 2 ticks higher at 142.85, with traders saying the day's high at 143.11 - also Friday's session high - will provide near-term technical resistance.