* Higher-yielding euro bond yield spreads narrow over Bunds
* Future of ECB bond-buying in focus at policy meeting
* Bunds fall as flight-to-safety flows ebb
By Anna Yukhananov
LONDON, Dec 1 (Reuters) - Bond purchases by the European Central Bank and growing expectations it could expand the scheme turned down the heat on the euro zone's higher-yielding sovereign debt on Wednesday and sent German benchmarks tumbling.
Bund futures fell more than a full point on the day, hit also by a German five-year bond sale which received less bids than the amount offered as some investors fretted about the cost of future euro zone bailouts to the region's biggest economy.
Irish, Italian and Iberian countries' bonds outperformed German debt, and the cost of insuring their debt against default fell, with some in the market anticipating the ECB would announce fresh details of bond purchases at its monthly policy meeting on Thursday. [ID:nLDE6AS0F6]
"With the ECB press conference tomorrow, people may be putting on short positions in the hope they'll increase the size of the purchasing scheme," Eamon Reilly, a trader at Davy Stockbrokers, said.
"Tomorrow will be an ideal chance to get ahead of the curve ... and squeeze (peripheral) yields tighter again," he said.
Analysts said there was little to suggest the ECB would change the scale or timing of the three-month liquidity operations introduced in May to stabilise markets.
But even a small chance of a change in ECB policy meant investors would have to prepare for spreads continuing to narrow, market participants said.
The Portuguese/German 10-year yield spread PT10YT=TWEB hit its lowest in a week at 423 basis points, and the equivalent Irish spread also narrowed, with traders pointing to ECB purchases of Irish and Portuguese debt.
"They've been buying first thing this morning and it's continued throughout the day ... in bigger clip (bond) sizes than normal," Reilly said.
Portugal also showed it could still access short-term debt markets with a 500 million euro sale of 12-month T-bills, but the yield demanded by investors hit its highest since the introduction of the euro at 5.281 percent. [ID:nLIS002518]
Spain, which is in the market's crosshairs as next in line after Portugal for possible bailout funding, is also expected to pay higher yields to sell an estimated 3 billion euros of 2013 bonds on Thursday.
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