UPDATE 1-Brexit, Fed keep euro zone bonds sidelined, but new low for Portugal yields

Most euro zone bond yields held near recent lows on Tuesday, with Brexit uncertainty and a two-day U.S. Federal Reserve meeting keeping investors sidelined.

In the wake of Friday's ratings upgrade from S&P Global, Portugal's 10-year bond yield touched a new historic low at 1.25 percent, taking its falls this year to 46 basis points. But the overall tone in the bloc's debt markets was subdued.

There was some support for safe-haven debt after British Prime Minister Theresa May's Brexit plans were thrown into further turmoil on Monday when the speaker of parliament ruled that she could not put her divorce deal to a new vote unless it was re-submitted in a fundamentally different form. British 10-year gilt yields briefly dipped to 1.175 percent , their lowest in almost a week.

But there was also some hesitancy to push higher-rated bond yields even lower without a fresh reason, analysts said. "What we've seen is some consolidation in core bonds, investors are not willing to keep buying German Bunds given that yields are close to zero," said Cyril Regnat, a fixed income strategist at Natixis.

Germany's benchmark 10-year bond yield was last up just 1 basis point at 0.09 percent, around four basis points away from more than two-year lows hit earlier this month. Most other euro zone bond yields were also little changed, although Italy's 10-year bond yield was up almost four bps on the day at 2.46 percent -- giving up some of the previous day's sharp falls.

Regnat said the upcoming end of the fiscal year in Japan was dampening trading activity in Europe given that Japanese investors tend to be active in euro zone bond markets. A two-day meeting of the U.S. Federal Reserve, which kicks off on Tuesday, also added to subdued trading with the focus on Fed policymakers' interest rate forecasts and whether they will share details on a plan to stop culling the Fed's holdings of almost $3.8 trillion in bonds.

"We've heard from the ECB (European Central Bank)and now it's the Fed's turn," said Pooja Kumra, European rates strategist at TD Securities in London. "We are looking at the Fed's dot plots and the progress on the balance sheet run off." Portugal's 10-year bond yield touched 1.25 percent, the lowest level in at least 25 years.

Friday's S&P ratings upgrade has given an additional boost to the Portuguese bond market, lifted earlier this month by the ECB's dovish tone and promise of more cheap bank loans to support growth. (Reporting by Dhara RanasingheEditing by Alexander Smith)