RPT-Italy bond yields soar, euro falls on political worries

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LONDON, May 29 (Reuters) - Italy’s short-dated bond yields soared on Tuesday, while the euro tumbled to fresh multi-month lows on growing concerns about political uncertainty in Italy - the euro zone’s third biggest economy.

Italy’s 2-year bond yield spiked some 80 basis points to 1.937 percent, its highest since late 2013, according to Reuters data. Italy’s 10-year bond yield jumped 24 bps to 2.93 percent -- their highest since around mid-2014.

That left the Italian/German 10-year bond yield gap at 264 bps, its widest since 2013.

Spain’s bond-yield spread with Germany, pushed out also by its political worries in Madrid, was at its widest in seven months at 122 bps.

The euro dropped below the $1.16 line for the first time in 6-1/2 months on Tuesday, down 0.3 percent on the day. Against the franc, it fell by a similiar margin at 1.1528 francs per euro.

Political uncertainty in Italy and Spain meanwhile boosted demand for safe-haven German bonds, with both short and long-dated bond yields in Europe’s biggest economy falling to fresh multi-month lows.

Germany’s 10-year bond yield was last down 5 bps at 0.29 percent. (Reporting by Dhara Ranasinghe; Editing by Saikat Chatterjee)