* Bunds rally as rescue euphoria fades * Italian yields rise to near euro era highs, ECB intervenes * Curve-flattening highlights credit concern By Marius Zaharia and Kirsten Donovan LONDON, Oct 31 (Reuters) - Italian bond yields rose on Monday, prompting the European Central Bank to buy the debt, as euphoria over Europe's plan to contain its debt crisis cooled and worries emerged that a G20 summit this week could disappoint. There are still questions about the plan, notably over how the EFSF euro rescue fund will be leveraged and the meeting of the Group of 20 is expected to reveal little support from countries such as China or Japan for its special purpose vehicle. "Markets are in a risk off mode again because there are a lot of worries that Europe's politicians won't get too much help from the rest of the G20 states regarding money for the EFSF," said Christian Reicherter, analyst at DZ Bank. The Italian/German 10-year government bond yield spread widened by some 30 bps to 410 bps, nearing euro era highs and the 2/10 year Italian yield curve flattened around 10 basis points to the least in a month. "The worrying sign is the front-end of the curves coming under pressure as they price in the increasing risk of a credit event," Rabobank rate strategist Richard McGuire said. "Clearly last week's summit has only had a transitory impact." Cash 10-year Italian yields rose above 6 percent -- despite traders saying the ECB was buying Italian and Spanish debt in secondary markets -- trading at levels last seen before the central bank resumed its bond purchasing programme. ING strategists recommended new long positions in Italian 10-year paper at these levels, on the view that the ECB would cap the rise in yields. DZ Bank's Reicherter said it was safer to wait until the ECB's meeting on Thursday to assess how open the bank is to stepping up its purchases under its new Italian chief Mario Draghi. UNCERTAINTY Bund futures rose by almost two full points. The December contract last traded 169 ticks higher on the day at 135.36, while Bund yields were 14.1 bps lower at 2.042 percent. Uncertainty over policymaking will probably keep markets volatile in November as well, with October's 133-139 range likely to be tested again, traders said. Bunds lost some ground last week after the new measures to tackle the euro crisis were announced, but tepid demand at an Italian bond sale on Friday, which pushed yields at the auction to euro era highs, reflected doubts that those plans would be enough and marked a turnaround in sentiment. Lloyds Bank strategists said that in order to keep investors interested in riskier assets "the (G20) summit must show results beyond a common statement highlighting the global support on Europe's effort to stir out of the crisis, producing specific, concrete and tangible promises from at least the U.S., Japan and China that they will invest in the EFSF." Elsewhere, Belgian bonds underperformed other euro zone issuers, with the exception of Italy with 10-year bond yields 9 basis points higher at 4.42 percent as the country sold 2.155 billion euros of bonds "The Belgian auctions were OK rather than strong, as the amount raised was only in the middle of the target range," said Credit Agricole rate strategist Orlando Green. Despite Belgium's underperformance on the back of supply, ING rate strategists recommend a long Belgium versus France position on the view that the two countries' credit ratings would converge. France's triple-A status has recently come under closer scrutiny on concerns its participation in increasing the firepower of the EFSF could worsen its finances. French 10-year yields were last 3.6 bps lower at 3.13 percent.