* Bond markets nudge higher before ECB, summit * Bunds seen supported whatever ECB does * Margin call on Italian bonds cut By Kirsten Donovan LONDON, Dec 8 (Reuters) - German government bonds edged higher on Thursday before an anticipated cut in euro zone interest rates and an EU summit, with most investors sidelined by deep uncertainties over whether politicians will do enough to stem the debt crisis. Bonds from highly indebted countries on the euro zone periphery were also broadly steady after yields began to rise again on Wednesday when a German official dampened expectations of major breakthroughs at the summit. Italian yields, however, edged lower after international and domestic clearing houses LCH.Clearnet SA and Cassa di Compensazione e Garanzia (CC&G) cut the cost of using the country's bonds to raise funds. The move following some easing in Italian yields. The European Central Bank is expected to cut rates and unveil a new package of bank aid, while investors will also look for any hint it will intensify its bond buying support for the euro zone's struggling peripheral economies. While peripheral bonds were likely to come under pressure if the ECB did not meet expectations, particularly on bank aid, Bunds were likely to retain support whatever the outcome. "The risk is they don't deliver enough, especially for banks. The market is worried about the redemptions they have next year," said ING rate strategist Alessandro Giansanti. "That would be supportive for Bunds...and if they are aggressive in cutting rates, the market will price in more for next year." Some already expect the ECB to cut again early next year, although markets are not yet fully pricing this in. March Bund futures were nine ticks higher at 135.60 with 10-year yields 0.2 basis points lower at 2.057 percent. "The risk is that the ECB underdeliver and we see a bit of disappointment but perversely that could eventually support Bunds," a trader said. "Positioning is very light and we're likely to stay volatile, there's a lot of event risk." UBS technical analyst Richard Adcock said that after Wednesday's rally Bunds could rise further while they traded above Monday and Tuesday's 134.20 and 134.22 lows, with a break above Wednesday's high of 136.21 opening the way to 137.22 initially. French President Nicolas Sarkozy and German Chancellor Angela Merkel will propose to the summit a plan to impose mandatory penalties on euro zone states that exceed deficit targets, aiming to restore market confidence and prevent the region's debt crisis from spiralling out of control. But optimism the summit would lead to a turning point in the euro zone's debt crisis took a hit after a senior German official gave a downbeat assessment of prospects for an agreement. "It looks difficult for the ECB to beat market expectations today and headline risk remains elevated...pre-summit," said Commerzbank strategist Rainer Guntermann, adding because of that the bank preferred to maintain a neutral position for Thursday's trading session.

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