* Spanish yields rise on concerns over implication of bailout * Italian yields jump pre-auction * Bunds slide, traders cite large seller By Ana Nicolaci da Costa LONDON, June 12 (Reuters) - Spanish government bond yields rose to near euro-era highs on Tuesday as a bailout for the country's banks did little to soothe concerns over its long-term ability to access markets. Italian bond yields also rose before an auction on Thursday, when the Treasury may have to pay dear to sell debt, with Sunday's make-or-break Greek election adding to volatility. Investors took profit on German Bund futures after a rally the previous day but the sell-off was expected to be short-lived. They were seen taking refuge in the Bund before a vote that will be decisive for Greece's membership of the euro. "There was a big seller, an insurance fund, of long-end Bunds and they did it on screens. They hit three different dealers at the same time which sent us shooting down," a trader said. "But I don't expect this to last now that (Dutch) supply is out of the way. I think we're going to rally back up. It was something to do with asset allocation within their fund." The Netherlands sold 1.65 billion euros of bonds maturing in 2033. Bund futures fell 68 ticks to 143.21, pushing yields on 10-year German debt 6.6 basis points higher to 1.37 percent. Y i elds hit a record low of 1.127 percent earlier in June. "It's difficult to see a floor (for Bund yields) when you can see the potential risk events coming up, particularly with regards to Greece," Lyn Graham-Taylor, fixed income strategist at Rabobank, said. Spanish yields jumped 9 bps to 6.61 percent, drawing closer to euro-era highs of 6.8 percent, and the cost of insuring Spanish debt against default jumped 10 bps to a record high of 605 bps, according to Markit data. Italian bonds also came under pressure before Thursday's debt sale, with the 10-year yield rising 6 bps to 6.10 percent. "It must be because of the auctions that are coming in the next couple of days," a trader said. "(I) haven't seen many flows so far anyway. I would say it's mostly future contract driven." The Italian BTP future was down 94 ticks at 97.60. COLLATERAL DAMAGE The Italian Treasury said on Monday it would offer up to 4.5 billion euros three-year bonds on June 14 and off-the-run securities maturing in 2020 and 2019. While the auction is supposed to meet demand from domestic investors, the current market conditions may make it more costly for Italy to raise those funds, analysts said. "I think they will get it away fine, it will just cost them," Graham-Taylor said. Measures adopted by Italy have put the country on a sound footing to face the current financial turmoil, Industry Minister Corrado Passera said on Monday, and dismissed the idea Rome may need external help.. But sentiment towards Italy is vulnerable and could be made worse if the Spanish bailout depletes the funds available for dealing with Italy should contagion spread. There are also worries about Italy's ability to rein in its debt when the economy is contracting. Italy's economy shrank by 0.8 percent in the first quarter, data showed on Monday.

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