* Lisbon faces toughest bond sale in years
* Germany also selling 10-year bonds at auction
* President-elect Trump due to speak at 1600GMT
* Italian court rules on labour reform referendum
By John Geddie
LONDON, Jan 11 Portuguese yields held near
11-month highs on Wednesday as the country prepared for its
toughest bond sale in years, while an auction of safe-haven
German debt was expected to be well supported by investors
nervous about an upcoming Donald Trump press conference.
Lisbon -- rocked by a persistent bank crisis, sluggish
economy and reduced support from the European Central Bank -- on
Tuesday hired a group of banks to manage the sale of a new
10-year bond, likely to come to market on Wednesday
Germany will also sell 10-year debt on Wednesday at its
regular auction, and strategists said demand would be supported
by concerns about Donald Trump's first press conference since he
won November's U.S. presidential election.
Trump's calls for fiscal stimulus have pushed up inflation
expectations, and with it stocks and bond yields. But his
protectionist statements and jibes at China are considered
potential sources of diplomatic tension that could roil markets.
His press conference is scheduled for 1600GMT.
"Trump's first press conference is the major risk event
today that should support demand for core paper," Commerzbank
strategist Michael Leister said. "When facing critical
journalists, the incoming President may struggle to impress
markets as much."
German 10-year yields -- the bloc's benchmark -- edged lower
to 0.28 percent, keeping clear of Monday's 0.325
percent three-week high.
Other highly rated euro zone yields were broadly flat on the
day, although rising Portuguese yields pulled up those in Spain
and Italy as well.
Portuguese 10-year yields rose 4 basis points to 4.09
percent. Spain and Italy's were 3 bps higher at
1.51 percent and 1.95 percent,
Aside from Portugal's difficulty in finding a buyer for Novo
Banco, a bank carved out of collapsed Banco Espirito Santo,
investors are worried that a potential ratings downgrade could
exclude the country from the European Central Bank's bond-buying
It is already benefiting less than others from the trillions
of euros being spent by the central bank.
As it approaches a ceiling on the amount of Portuguese bonds
it can hold, the ECB has been buying far less of Lisbon's debt
than its rules dictate in recent months.
Another concern in southern Europe is a ruling due from
Italy's constitutional court on whether a request to hold a
referendum on the 2014 labour-market reform is in line with the
However, strategists at DZ Bank said it is "pretty unlikely"
that a plebiscite will actually be held, even if the
constitutional court approves the request.
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(Editing by Larry King)