* Secondary market yields up as issuance focused on short-end
* Data in China and France boost safe-haven Bunds
By Ana Nicolaci da Costa
LONDON, Sept 20 (Reuters) - Spanish government bond yields rose on Thursday with the question of whether and when Madrid will ask for a bailout still unresolved, although it comfortably sold more than the targeted amount at a sale thanks to the prospect of central bank intervention.
German Bund futures firmed as gloomy manufacturing data drove investors to seek safety in low-risk debt, but came off their highs after supply from Spain and France was out of the way.
Manufacturing in China contracted for the 11th month in a row in September, while French business activity shrank at its fastest rate since April 2009, prompting investors to shun riskier assets in favor of safe-haven ones.
Spain comfortably sold 4.8 billion euros of three- and ten-year bonds, the bulk of which was issued in short-dated maturities and was within the scope of the European Central Bank's bond-buying plan - which will only be triggered if Madrid asks for a formal financial aid.
In the same way as Madrid ratcheted up its issuance earlier this year when the market was euphoric with one trillion euros of cheap ECB financing, the Treasury sought to get as much done as possible in calmer financial market conditions.
But Bunds remained higher after the auction and ten-year Spanish bonds under pressure, with traders also worried Madrid's tactic to raise funds in the short end could eventually backfire by shortening the average maturity of its overall debt and forcing it to go to market more frequently in coming years.
"The strong demand (was) for the shorter maturity in particular. I would have thought investors would feel fairly comfortable about buying that because of the buyer of last resort," Elisabeth Afseth, fixed income strategist at Investec said, referring to the ECB.
"Obviously Spain would have to ask for a programme before that would kick in but at least that option is there should things get worst."
The Treasury sold 3.9 billion euros of a new three-year issue and 859 million euros of a key 10-year bond. But financing costs on ten-year bonds fell to 5.666 percent, down from 6.647 percent last month and to a level Afseth deemed "acceptable."
"Spain will be opportunistic and where there is demand they will sell," Afseth said.
Ten-year Spanish yields were up 4.1 basis points at 5.77 percent, little changed compared to before the auction, and two-year yields were up 4.1 basis points at 3.26 percent in choppy trading.
German Bund futures were 20 ticks higher on the day at 139.91 compared to 140.02 before the auction.
"People are conscious of the fact that Spain's weighted average of maturity continues to fall," one trader said.
The weighted average of the country's overall debt was last at 6.33 years, down from about 6.7 years in the beginning of 2012 and from a peak of 6.84 years in 2007.
PRESSURE ON SPAIN
Investors are ramping up pressure on the euro zone's fourth largest economy to seek financial help, with borrowing costs over 10 years briefly creeping above 6 percent this week.
But Madrid remains reluctant to ask for aid which may cause it to lose some fiscal sovereignty and potentially place its economy under further growth-stifling austerity.
Nomura strategist Artis Frankovics said the danger point for 10-year Spanish yields was 6.5 percent -- a level beyond which analysts say Madrid would start thinking about asking for formal help in earnest.
"As they postpone the decision I think the market will push the yields higher and then eventually they will be pushed to ask for a bailout. So our view is that they will ask for it by the end of October and they will be pushed into it," he said.
He remained bullish on the Bund and worried about the euro zone as a whole, saying the current policies under examination - including ECB buying alongside the euro zone rescue fund - did not provide a sustainable solution to the crisis.
France, which in recent months has benefited from a hunt for yield relative to Germany, sold a total of 7.965 billion euros of two-, three- and five-year bonds.
Its borrowing costs mostly fell at an auction of medium-term debt on Thursday that drew firm interest from investors seeking safe-haven assets following weak economic data.
French bonds were lower across maturities in the secondary market, with the 10-year yield 2.9 bps higher on the day at 2.30 percent.
