* Italian, Spanish bonds under pressure before debt sales * Concerns over euro zone seen overshadowing U.S. data * Demand seen for short-dated Italian, Spanish bonds By Ana Nicolaci da Costa LONDON, Jan 6 (Reuters) - Italian and Spanish government bond yields rose on Friday and are expected to remain elevated as debt from the two countries on the frontline of the euro zone crisis comes under pressure before auctions next week. Market players cashed in on German bonds before data expected to show an improvement in key U.S. payrolls but any more good news out of the United States was likely to be overshadowed by ongoing doubts about the euro zone's ability to overcome its deep-seated crisis. Renewed worries about Greece's ability to meet debt repayments, Spain's public finances and Austrian banks' exposure to struggling Hungary should limit any sell-off in safe-haven German debt, analysts said. "There are rising concerns in Europe about Greece, the budget deficit in Spain ... so clearly the environment remains favorable for bid for safety, so the Bund will continue to outperform (and) spreads are still under widening pressure," Patrick Jacq, rate strategist at BNP Paribas said. "I would say that whatever U.S. data (emerges) this afternoon, the risk will continue to be a key driving force." Benchmark Italian 10-year government bond yields rose 3.8 basis points to 7.2 percent -- borrowing levels perceived to be unsustainable over the long-term. Five year yields were up 8.3 bps at 6.31 percent. Spanish 10-year government bond yields rose 4.1 bps to 5.72 percent, with the five-year yield surging 12.6 bps to 4.89 percent. The European Central Bank intervened in those markets, according to a trader. "I will stick to my view that things are going to blow up (in the euro zone)," he added. SENTIMENT TEST Spain is due to issue two bonds maturing in 2016 and a new bond maturing in 2015 next week. Italy is expected to sell 3-, 5- and 15- year paper also next week, according to Barclays in a research note. Jacq said the short-dated maturity of some of those bonds as well as the excess liquidity in the euro zone financial system following a European Central Bank funding injection in December would provide a favorable backdrop for the sales. Concerns over the euro zone should limit any sell-off in German Bunds, analysts added. The Bund future fell 18 ticks on the day to 138.61, having rallied 70 ticks in the previous session. "Despite yesterday's improvement, buying interest in Bunds has repeatedly stalled above 139.00 since September," Pia First said in research note. Nonfarm payrolls are expected to have risen 150,000 last month, according to a Reuters survey, after increasing 120,000 in November. That should cement a view that U.S. economic growth accelerated in the fourth quarter, but the economy would need even faster job growth over a sustained period to make a noticeable dent in the ranks of the millions of Americans who remain either out of work or underemployed.. "Maybe payrolls is going to be alright but I think we are still looking to buy dips," the trader said.