LONDON, Aug 8 (Reuters) - The Italian/German 10-year bond yield gap was at its widest in a month on Thursday following further signs of growing tensions within the ruling coalition that could lead to early elections in the euro zone’s third biggest economy.
Italy’s ruling League party said on Thursday that if its growing policy differences with its coalition partner the 5-Star Movement lead to a government collapse then the only option is to hold fresh elections.
The 10-year Italian bond yield extended its rise to 1.58% , up 17 basis points on the day. That pushed the gap over safe-haven German Bund yields to just around 211 bps — the widest in a month.
ING senior rates strategist Benjamin Schroeder said the selloff in Italian bonds may also reflect some unease over a Fitch Ratings review on Italy on Friday.
“Early elections have been on the radar for a while but they may be coming a bit quicker than anticipated,” he said. (Reporting by Dhara Ranasinghe; editing by Virginia Furness)