* March 15 Dutch election next test for euro zone
* Dutch bonds may be underpricing political risk
* BlackRock, Allianz GI underweight Dutch govt bonds
* Graphic: reut.rs/2h03Dn5
By Dhara Ranasinghe and John Geddie
LONDON, Dec 19 (Reuters) - Investors risk being caught unprepared again by an anti-establishment vote when the Netherlands, the euro zone's fifth largest economy, goes to the polls in March.
Surveys point to strong gains for the anti-Islam, eurosceptic Freedom Party led by Geert Wilders.
Some investors have reduced exposure to Dutch government debt, saying this partly reflects election uncertainty.
But while Italian bond yields hit 14-month highs before a Dec. 4 referendum and French yields are near 11-months peaks on worries about Spring presidential elections, a rise in Dutch bond yields has been relatively contained.
"The spread (between Dutch and German bond yields) does not reflect the magnitude of the political risk in the Netherlands," said Franck Dixmier, global head of fixed income at Allianz Global Investors.
"Even if the Freedom Party does not win the election, it is likely to get more seats and start to be more vocal about the idea of 'Nexit'."
After Britain voted in June to leave the European Union, Wilders said the Netherlands, one of six founder states of what is now the EU, should hold its own membership referendum.
According to a recent poll, Prime Minister Mark Rutte's conservative VVD Party would lose nearly half its 43 seats in parliament if elections were held today, trailing the Freedom Party by 33 seats to 23. Junior coalition partner Labour could lose 28 of its 38 seats.
After Britain's shock Brexit vote in June and U.S. President-elect Donald Trump's unexpected victory last month, investors have sold the bonds of euro area states seen as vulnerable to a backlash against the political establishment.
The gap between Dutch 10-year bonds and their German peers is 14 basis points, having briefly hit 20 bps last month, the widest in almost five months.
As this graphic, reut.rs/2h03Dn5 shows, a widening in the spread -- a gauge of how investors view relative risk -- since the U.S. election has been modest compared with the move in French or Italian bonds.
"If the Dutch/German 10-year spread got out to 30 bps that would be a good time to get back in, but if it broke below 10 bps, you'd have to say it's not pricing in enough of a risk," said ING global head of debt and rates strategy Padhraic Garvey.
Analysts do not expect Wilders, who has lived with 24-hour protection for a decade because of anti-Islam comments, to become the next prime minister because other large and medium-sized parties have said they are unwilling to work with the Freedom Party or support Nexit.
Even if the Freedom Party secured a place in government, a majority in the Netherlands in favour of leaving the EU remains unlikely and that should limit any impact on the country's borrowing costs, says Dutch bank ABN AMRO.
Also, any worries about a Nexit that could raise euro zone break-up risks may be more evident in the selling of weaker, peripheral countries such as Italy and Portugal or in greater demand for top-rated German debt.
And if this month's Italian referendum is any guide, bond markets should recover from any short-term turbulence.
Like Germany, the Netherlands has a rare triple-A credit rating -- allowing it borrow more cheaply than lower-rated peers such as Italy.
As a "core" euro zone bond market, Dutch bonds tend to be less volatile, backed by a relatively robust economy. Strengthening economic growth could also dent Wilders' standing in the polls in the months ahead.
Debt of all countries with rising populist parties and increased risks has underperformed in recent weeks, however, and Dutch bonds are unlikely to be immune from concerns about the political outlook as the election nears, analysts said.
Michael Krautzberger, BlackRock's head of European fixed income, said the firm had gone underweight Dutch bonds, partly because of election uncertainty but mostly because Dutch bonds were very expensive on a valuation basis.
"In some markets like France and Italy you also have uncertainty but markets are fully priced to reflect that. To some degree that is absent in the Netherlands," he said. (Reporting by Dhara Ranasinghe; Graphic by Nigel Stephenson; Editing by Catherine Evans)