Yields on Portuguese debt rose on Monday as pressure mounted on Lisbon to seek financial aid, with investors looking to a bond auction later this week as a measure of the country's ability to fund itself.

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Portugal's debt is under pressure.

Spanish and Italian bond yields also rose, pushing spreads over the 10-year German benchmark to their widest since Dec. 1.

All three countries will auction bonds later this week as investors remain nervous over whether the highly indebted sovereigns will be able to raise funds at sustainable levels in 2011.

A senior euro zone source said on Sunday pressure was growing on Portugal from Germany, France and other countries in the currency bloc to seek financial help and stop the spread of the region's debt crisis.

"The sovereign debt crisis is increasingly coming back into the market's focus...there is a lot of concern among politicians over the crisis and this only fuels the market's concerns," said Niels From, chief analyst at Nordea in Copenhagen.

The Bund future was five ticks lower at 126.19, having earlier hit a session high of 126.46, with traders citing little safe-haven support for German debt.

Portugal is seen by market participants as the next in line to ask for bailout funds from the European Union and International Monetary Fund.

Last year Greece and Ireland sought external aid after they were frozen out of bond markets due to worries over bloated budget deficits and banking sector weakness.

Fears that Germany's finances will be hit by the cost of bailing out more euro zone sovereigns were a factor in Bund yields rising sharply in the last quarter of 2010, and were limiting safe haven flows into Bunds, analysts said.

"With spreads widening again and equity markets opening lower it's a little surprising that Bunds are down... but the feedback we get is that players are being more cautious and securing profits given recent volatility," said Michael Leister, strategist at WestLB in London.

Belgian Uncertainty

The Belgian/German 10-year yield spread widened 15 basis points on the day to 141 bps as uncertainty grew over Belgium's ability to form a government and tackle its debt problems.

"You have a country with high debt ratios that is politically in a very uncertain situation... it's definitely something that is very negative from a market perspective," Nordea's From added.

Last week attempts to end Belgium's long political deadlock ended without success, raising the chances of fresh elections.

The 10-year German bond yield was 2.876 percent, up 0.5 bps on the day while the two-year Schatz yield was 1.5 point higher at 0.876 percent.