* Impasse in Athens, austerity/growth debate favor Bunds * Bund rally could lose momentum at lofty levels * Dutch and Austria sell bonds By Ana Nicolaci da Costa LONDON, May 8 (Reuters) - German Bund futures flirted with record highs on Tuesday as elections that dealt a blow to Europe's austerity drive and failed to endorse Greece's main pro-bailout parties drove investors to seek safe havens. Top-rated German debt and sales of Dutch and Austrian bonds benefited from multiple doubts about whether Greece can pursue the reforms needed to keep international aid flowing and how far new French Socialist leader Francois Hollande can change Europe's policy focus from austerity to restoring growth. "Part of it is the uncertainty about Greece. The most likely scenario is that they repeat elections now in the middle of June and of course we don't know what the outcome will be," Achilleas Georgolopoulos, strategist at Lloyds Bank said. The first meeting between Hollande and German Chancellor Angela Merkel, whose country has spearheaded Europe's austerity drive, would be vital, he said. "Up to then, everybody is going to talk about how growth can be combined with austerity, but we need something concrete. And until we get that it's going to be a push for lower (German) yields," Georgolopoulos added. Ten-year German government bond yields fell 3.2 basis points to 1.57 percent - not too far from a record low of 1.549 percent. German Bund futures rose 41 ticks to 142.23 and hit a session high of 142.34 - within sight of the record 142.44 hit on Monday in volumes thinned by a public holiday in Britain. The appetite for safety also underpinned demand at a sale of Dutch and Austrian bonds. "It's gone very well overall, very slick and efficient," Marc Ostwald, strategist at Monument Securities said of the 2.5 billion euro sale of Dutch 2022 bonds. "It just emphasizes the point that spreads (premiums) relative to Bunds are that much more attractive and with Bund yields where they are and a lack of alternatives given uncertainties elsewhere, there is demand by default." A top-up of Austria's 2017 bond saw demand worth 2.3 times the amount on offer. Austrian bonds outperformed their counterparts, with 10-year yields down 4.6 bps at 2.56 percent, while the Dutch equivalent shed 3.3 bps to 2.12 percent. "People are beginning to hunt for yield a bit," Lyn Graham-Taylor, fixed income strategist at Rabobank said. TECHNICAL VERTIGO Analysts expected further upside in the Bund future but said rallies could start losing momentum because German bonds were already trading at high levels. Piet Lammens, strategist at KBC said shorting the Bund was not a profitable trade right now but he was also not advising clients to buy the contract at current levels. "To investors we would say that at this stage we don't favour the Bund because the yields are much too low intrinsically," Lammens said. He said if the Bund fell below the 140.04-139.80 area then he would reconsider that position. "If we only test that level, as long as we are not below it, then we don't think that the climate has really changed," he said. Investors will look to a sale of five-year German bonds on Wednesday to gauge whether the appetite for safety is enough to offset the increasingly meagre returns offered by German bonds. Five year bonds yielded only 0.55 percent in the secondary market. "This is a very uncertain backdrop that we face. Ironically the greater challenge is probably the five-year German bond (sale) tomorrow," Ostwald added.

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