The Mediaset tower in Cologno Monzese, near Milan, Italy, April 8, 2016. REUTERS/Stefano Rellandini/File Photo
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Italy's borrowing costs surged further on Monday and its stock market touched six-week lows as two anti-establishment parties that plan to ramp up spending appeared set to form a coalition government.The prospect of a spendthrift government taking shape in Italy, the euro zone's third-biggest economy and its most indebted after Greece, has rattled markets.Italian two-year bond yields jumped more than 10 basis points to 0.23 percent, their highest since December 2016, before pulling back in afternoon trade to 0.17 percent. As 10-year Italian debt yields hit 10-month highs at almost 2.30 percent, the gap over benchmark German Bund yields pushed out to 175 bps -- the widest since October.The Italian-German bond spread, however, remains below the 200-plus bps levels seen early last year when euro zone break-up fears gripped markets ahead of French presidential elections.Also, most euro zone bond yields were down on the day, except in Spain and Portugal, where markets felt some pressure from the sell-off in Italy.
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