* S&P Global could follow Fitch with Spain upgrade to A-
* Spanish yields now closer to Ireland and France than Italy
* Geopolitical, Italian election concerns weigh on market
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
LONDON, March 23 (Reuters) - Spanish government bond yields were near their lowest in over a year ahead of a potential ratings upgrade later on Friday that would take Spain's credit rating firmly into Single A territory and further away from its peripheral peers.
S&P Global is set to review its rating on Spain after the market close on Friday, and analyst expectations are for an upgrade from BBB+ to A-, after a similar move from Fitch earlier this year.
This would move Spain further away from its main peer Italy and towards better rated euro zone countries such as Ireland, Belgium and France, referred to in the market as "semi-core" countries.
"This would put Spain back into the average single-A bucket for most indices, opening a larger investor base and underscoring the convergence momentum with semi-core," Commerzbank analysts said in a note.
Spanish government bond yields inched lower to 1.28 percent, just a shade off a 15-month low of 1.266 percent hit on Thursday.
The closely-watched Spanish/Italian 10-year government bond yield spread was at 60 basis points, which is historically high, even if it is not quite as wide as it was earlier this year.
Spain's 10-year borrowing costs are now closer to that of Ireland - the spread between the two is 33 basis points - while the Spain/France 10-year bond yield spread is 52 bps. ,
"You might some investors such as bank treasuries who can only invest in Single A credits so you could get some inflows," said ING strategist Benjamin Schroeder, though he warned against overblowing this apparent trend.
"Italy-Spain has been the traditional pair, so it's difficult to see them fully detaching. So Spain will still be affected by Italian politics and so on," he said.
He pointed to some relative weakness in Spanish and Italian bonds earlier this week on concerns over the formation of the new Italian government.
Italy's anti-establishment 5-Star Movement and rightist parties are currently looking to wrap up a deal on who should be appointed as speakers for the new parliament, which opens on Friday after this month's inconclusive elections.
The market is also weighed down by geopolitical concerns with the possibility of a trade war and U.S. President Donald Trump's appointment of a hawkish national security adviser worrying investors.
Trump shook up his foreign policy team again on Thursday, replacing H.R. McMaster as national security adviser with John Bolton, a hawk who has advocated using military force against North Korea and Iran.
U.S. 10-year Treasury yields, which fell almost 8 basis points on Thursday, were set for their biggest two-week fall since September.
In Europe, benchmark issuer Germany's 10-year bond yield hovered close to 10-week lows struck a day earlier at around 0.52 percent and was on track for its biggest two-week drop since August, down 13 bps. (Reporting by Abhinav Ramnarayan, Additional reporting by Dhara Ranasinghe, Editing by Richard Balmforth)