By Ana Nicolaci da Costa and William James

LONDON, Feb 14 (Reuters) - German Bund futures rose on

Thursday as economic growth data for the euro zone fell short of

expectations and pushed some investors towards the safety of

low-risk bonds.

The euro zone economy slipped deeper into recession than

expected in the last quarter of 2012, contracting 0.6 percent

compared to a forecast of 0.4 percent. Germany, France and Italy

- the region's three largest economies - all performed worse

than predicted.

'This is not good news. It shows a need for fairly relaxed

monetary policy for some time to come and it increases the risk

on the peripherals,' said Elisabeth Afseth, analyst at Investec

in London.

That propelled German bonds - which are seen as a safe but

low-yielding place to park cash during times of stress - higher

on the day. Bund futures rose 54 ticks to a settlement

close of 142.59.

Weak growth has the double-pronged effect of hampering the

economies on the euro zone's fringes as they struggle to escape

their large debt burdens, while keeping 'core' German yields low

in anticipation of lower European Central Bank interest rates.

Traders also pointed to comments from European Central Bank

vice-president Vitor Constancio, who said a negative deposit

rate at the central bank remained possible, as supporting Bunds.

'We had weak GDP and then Constancio on negative rates.

We've probably over-reacted but that's pushed Bunds up through

resistances at 142.15, and now were hovering around another one

at 142.55,' a trader said.

A decisive break above 142.55, the closing level from Feb.

12, could give scope for a rise to 143, but that marked the top

of the recent range and was likely to contain any rallies, the

trader said.

PERIPHERAL RESILIENCE

The peripheral market's relatively muted reaction to the GDP

data underscores investors' ongoing appetite for risk, made

possible by the ECB's pledge that it will intervene should

struggling euro zone countries ask for help.

That promise has made investors reluctant to sell Italian

and Spanish debt, spurring them instead to return to those

markets to earn a profit.

Italian and Spanish bonds erased

early losses, with 10-year yields ending the day flat at 4.40

percent and 5.21 percent respectively.

'The resilience of the peripheral debt is quite surprising,'

said Cyril Regnat, fixed income strategist at Natixis,

highlighting the growth data and upcoming Italian elections.

Corruption allegations against Spanish Prime Minister

Mariano Rajoy's party and political uncertainty in Italy ahead

of this month's election has recently caused a six-month-long

peripheral bond rally to pause.

But the correction has been limited despite the risks

associated with the Italian vote, which some analysts fear will

result in a fragmented parliament and a weak government that

will struggle to push through structural reforms.

'If we don't have any sell-off on the debt it means investor

concerns regarding these elections are not so high,' Regnat

said. 'For this month, this is probably the biggest risk, at

least for Italian BTPs,' he added.

(Editing by Catherine Evans)

((ana.nicolacidacosta@thomsonreuters.com)(+ 44 207 542

8322)(Reuters Messaging:

ana.nicolacidacosta.thomsonreuters.com@reuters.net))

(--------------MARKET SNAPSHOT AT 1619 GMT ------------------ Futures continuous contract basis Current levels versus prior European close FUTURES CASH YIELD THREE MONTH EURO 99.755 (+0.010) 0.046 (-0.009) TWO-YEAR SCHATZ 110.485 (+0.095) 0.152 (-0.048) 10-YEAR BUND 142.650 (+0.600) 1.630 (-0.042) 30-YEAR BUND 2.422 (-0.016) 2/10 YIELD CURVE SPREAD 1.478 (+0.004) 10/30 YIELD CURVE SPREAD 0.792 (+0.011) 2-YR SWAP RATE (BID) 0.559 (-0.046) 10-YR SWAP RATE (BID) 1.870 (-0.057) 30-YR SWAP RATE (BID) 2.488 (-0.023) 2/10 SWAP CURVE SPREAD 1.311 (-0.011) 10/30 SWAP CURVE SPREAD 0.618 (+0.035) 2- YR BUND/SWAP SPREAD 0.406 (-0.001) 10-YR BUND/SWAP SPREAD 0.240 (-0.015) BREAKEVEN RATE (OATei 07/22) 2.060 (-0.010) 10-YR BUND/UST SPREAD 0.400 (+0.389) 10-YR BUND/OAT SPREAD 0.626 (+0.005) 10YR BUND/BONO SPREAD 3.573 (+0.040) 10-YR BUND/BTP SPREAD 2.765 (+0.051) 1)

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