* 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 (Reuters) - 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, respectively.
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 scheme.
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 constitution.
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.
For Reuters new Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Editing by Larry King)