UPDATE 1-No news is good news for Italian bonds while Moody's keeps its rating

* Moody's leaves Italian credit rating Baa3 and bonds resume vigor

* Portugal improves Portugal one step further and the rally is gaining momentum

* Portuguese in 10 years falls to "at least" 25 years

* Spanish bond yields also fall slightly (update prices, add quotations, points)

By Virginia Furness

LONDON, March 18 (Reuters) – News from the rating agency Moody's, which has decided not to downgrade Italy, has been an important news for the eurozone bond markets. Portuguese yields have reached record lows on the S & P upgrading valuations.

Broad-based euro area bond yields remained virtually unchanged as the market awaited clarification on Britain's Brexit negotiations and the US Federal Reserve meeting this week.

Moody's left the Italian credit rating Baa3 unchanged on Friday, bringing Italian government bond yields to their lowest level since May 2018. Standard & Poor's raised Portugal to BBB, and bond yields Portuguese state at 10 years have fallen to their lowest level for at least 25 years.

"Portugal has been improved, but the fact that Moody's did nothing with Italy's rating, despite the current headlines, is even more important," said Sebastian Fellechner, DZ's rate strategist. Bank. "The decision of non-ratings helps the market."

Italy's 10-year government bond yield dropped more than six basis points over the course of the day to reach a low of 2.43%, its lowest level since May 2018. Its spread on Germany highest rated has been reduced to its tightest peak since September 2018, at 234 basis points.,

Portuguese yields fell after Portugal's Standard & Poor's upgraded its BBB credit rating due to lower debt and balanced growth as the rally intensified as the session progressed.

The rating agency said it expects 1.5 to 1.7% growth of the Portuguese economy in 2019-2021. It is also expected that Portugal will record a budget surplus and reduce the ratio of public debt to gross domestic product.

Portuguese 10-year government bond yields fell to 1.25%, a drop of six basis points, after slipping after the announcement by the European Central Bank of a new series of targeted long-term financing operations, March 7.

"I bought the Portuguese auction last week," said David Slater, portfolio manager at Trium Capital.

"I think there is a lot of positive momentum in Portugal. It was a new position because I took part in the announcement on Friday. In general, over the past year, I played against Portugal on the long side. "

The 10-year German government bond spread on Germany has declined by around 40 basis points since the beginning of the year and was last seen at 114 basis points.

The recovery in the periphery also helped Spanish bonds with 10-year yields down three basis points to 1.17%.

Elsewhere, yields on 10-year French government bonds remained virtually unchanged, after the proliferation of weekend violence related to the protest movement yellow vest. The French prime minister is expected to announce new security measures.

The offer should also resume this week with 19 to 24 billion euros of core business, according to UniCredit badysts who say it will probably be the heaviest week of 2019. (Report of Virginia Furness and additional report of Jo Mason Editing by Mark Heinrich)