(Updates with moves in cash bond market, analyst comments)
By Emelia Sithole-Matarise
LONDON, July 1 (Reuters) - Italian and Spanish bond yields dipped on Wednesday as investors continued to lay cautious bets on a deal to keep Greece inside the euro zone, hours after it became the first developed economy to default on an IMF loan.
Euro zone finance ministers are due to confer later in the day over Greek Prime Minister Alexis Tsipras' request for a new two-year aid deal to pay nearly 30 billion euros of debts.
France said it would keep pushing for a deal before a Greek referendum on Sunday, hours before the ministers' second conference call on the crisis in two days. Greece's EU partners say the outcome of the plebiscite will determine whether it stays in the euro.
The muted market reaction to the Greek default was largely expected after talks to unlock cash from its second international bailout broke down earlier this week, with investors holding out hope of a positive outcome from the latest discussions on a new rescue package.
Italian and Spanish 10-year bond yields were 1 basis point down at 2.29 percent and 2.26 percent , respectively. Portuguese equivalents were 0.6 bps lower at 2.98 percent.
"Whatever the result of the referendum the market thinks at the end of the day there's going to be negotiations because it's in no-one's interest to see a Greek exit," said BNP Paribas strategist Patrick Jacq.
"The market is gradually positioning for a 'yes' at the referendum which to some extent puts the market at risk because nobody knows what's going to happen and the 'no' supporters still dominate when you look at the polls."
A poll by the ProRata institute published in the Efimerida ton Syntakton newspaper showed 54 percent of those planning to vote would oppose EU-prescribed bailout terms against 33 percent in favour. But a breakdown of results between those polled before and after Sunday's decision to close Greece's banks and impose capital controls showed the gap narrowing.
ECB MEETS ON GREEK BANKS
German 10-year yields, the benchmark for euro zone borrowing costs, were 0.6 basis points lower at 0.77 percent ahead of a sale of 5-year debt in Berlin, where the uncertainty over Greece is expected to prop up demand.
Focus is also on the ECB's policymaking governing council which is to meet in Frankfurt later in the day to decide whether to maintain, increase or curtail emergency lending that is keeping Greek banks afloat after a wave of deposit withdrawals and the state's default.
Germany's Bundesbank was leading hawks who argue that the ECB cannot go on providing funds through the Greek central bank to lenders that are backed by an insolvent sovereign.