* Signs of weak demand at Spanish bond auction spook investors
* Gloomy global growth outlook adds to pressure on periphery
* ECB expected to keep rates unchanged, no steer on Spain aid
By Emelia Sithole-Matarise and William James
LONDON, Nov 8 (Reuters) - Spanish and Italian debt yields rose on Thursday after signs of weak demand at an auction of new five-year Spanish bonds raised a warning flag for some investors.
Although Spain completed its 2012 funding needs with the 4.7 billion euro debt sale, including its first auction of longer-term bonds in 18 months, the wide range of bids accepted for the five-year debt drew criticism.
"The five-year sale was awful. I don't think it was good at all," a trader said, highlighting the 9 basis points difference between the highest accepted yield and the average yield - a measure of demand known as the auction 'tail'.
Spanish 10-year bond yields rose to 5.86 percent, up 14 basis points to their highest since mid-October, with yields across the curve rising by a similar amount and fellow struggler Italy's debt also pressured.
Madrid's borrowing costs sit well below their July peak, when investors looked to be abandoning the country because of its dire fiscal position.
But the market's goodwill is predicated on the country asking for a bailout and activating the bond-buying support of the European Central Bank, and politicians in Madrid show little sign of making such a move soon.
"Rajoy said recently he was fine with the current (borrowing) levels and the Tesoro can sustain these levels for a longer period of time," said DZ Bank strategist Christian Lenk.
"But, given the recent widening of spreads and the 10-year yields of the bonos creeping back to the 6 percent level you see that the ECB effect is fading away."
A risk-filled global backdrop also added to pressure on the euro zone's lower rated issuers.
President Barack Obama is facing a political showdown with a divided Congress over the so-called "fiscal cliff" of about $600 billion in expiring tax cuts and spending reductions due to take effect in January.
Some analysts warn the cutbacks could hit the U.S. economy hard, adding to European Commission warnings about anaemic growth in the euro zone and refreshing demand for low risk government bonds.
"The global environment has turned favourable for core bond markets and the EU forecasts for next year are rather gloomy, that's why we saw some (peripheral euro zone bond) risk-off moves," Patrick Jacq, a strategist at BNP Paribas, said.
The Bund future was last 7 ticks higher at 142.82, its highest level since Sept. 6, and was likely to remain around there before the ECB's rate decision due at 1245 GMT.
The central bank is expected to leave interest rates on hold at a record low 0.75 percent.
But comments by President Mario Draghi on Wednesday on the weak growth outlook, as well as the European Commission forecasts, have raised speculation the ECB may signal more willingness to ease in the next few months.
Traders and strategists expect little steer from Draghi at his post-meeting press conference on Thursday on the ECB's new bond purchase scheme before a decision by the Spanish government to request euro zone aid.