European leaders approved new measures intended to prevent a repeat of the massive overspending that contributed to the current crisis, giving risk sentiment a lift, but differences remained over the limits of austerity. In Greece, Prime Minister Lucas Papademos said he hoped to reach deals by the end of the week both with its private creditors over restructuring 200 billion euros of debt and with its international lenders on conditions tied to a second bailout. That eased some of the recent pressure on Portugal, which has been seen as next in line after Greece for requiring a second bailout. Ten-year Portuguese government bond yields tumbled 67 basis points, but at 16.73 percent they remain prohibitively high. "We are seeing Portugal very much under the cull still so that obviously should get more and more difficult for the market to shrug off," David Schnautz, interest rate strategist at Commerzbank said. German Bund futures fell 39 ticks on the day to 139.28 but still within sight of a record high of 140.23. "We are flirting with a real attack on the 140 level in Bund (futures)... we just touched 1.80 in the 10-year yield and there seems to be something of a resistance there, (but) we have already seen buying on dips," Schnautz added. Ten-year German government bond yields rose 4.4 basis points to 1.83 percent. "There's a bit of relief and a bit of a technical reaction given the Bund is reaching critical levels... but from our point of view (the pullback) doesn't really look convincing," said Michael Leister, strategist at DZ Bank. UBS technical analysis suggested the outlook remained bullish for German debt, while the contract traded above 138.78 - the 38 percent Fibonacci retracement of the rise since Jan 24. LIMITED RELIEF Progress towards tighter fiscal union was likely to be interpreted by investors as a long-term positive. The EU agreement was seen helping stall Monday's selling pressure on Italian debt. Ten-year yields fell 6.4 bps on the day to 6.04 percent, while two-year Portuguese bond yields shed 11 bps to 21.14 percent. But short-term worries over Greece and Portugal were set to slow the momentum behind a broad move into riskier assets seen since the European Central Bank flooded the market with cash in December. "People are still generally taking a positive view (on Spain and Italy), but we're getting down to some big levels where people are more comfortable trimming back their longs and maybe putting on some shorts," a trader said. Ten-year Spanish government bond yields were up 1.3 basis points at 4.82 percent. In a further sign of ongoing risks to the euro zone, unemployment remained high, underscoring the difficulty the region is having balancing its austerity drive with growth. Euro zone unemployment has risen to its highest level since the euro single currency was introduced, data showed on Tuesday, a day after EU leaders promised to focus on creating millions of new jobs to try to kickstart Europe's floundering economy. Seasonally adjusted unemployment among the 17 countries sharing the euro rose to 10.4 percent in December.