LONDON, May 29 (Reuters) - Italy’s 10-year bond yield gap over euro zone benchmark issuer Germany blew out to over 300 basis points on Tuesday, while 2-year Italian bond yields were set for their biggest one-day jump in 26 years as a political crisis in Italy rattled investors.
The Italian/German 10-year bond yield gap widened over 84 basis points on the day to 314 bps .
Italy’s two-year government bond yield soared more than 100 basis points to 2.28 percent, its highest level since July 2013.
The yield is set for its biggest one day jump in more 25 years, and well before the euro was launched in 1999.
The selloff in the Italian bond markets rippled over to foreign exchange markets with investors selling the euro heavily against every other currency.
Against the dollar it fell 0.8 percent to $1.1531, its weakest since early November. Against the Japanese yen , the single currency plunged to its lowest level since June 2017 at 125.10 yen. (Reporting by Dhara Ranasinghe and Saikat Chatterjee Editing by Tommy Wilkes)