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By Bloomberg

Italian government bonds dropped the most in a week as Greece’s Finance Minister Yanis Varoufakis blamed creditors’ insistence on more austerity for the lack of a deal that would release much-needed funds to the indebted nation.

German bonds advanced as investors sought safer assets amid the impasse between Greece and the euro-area’s other finance ministers. The Mediterranean nation has almost 1.6 billion euros ($1.7 billion) in payments to the International Monetary Fund due next month. Spanish bonds extended losses from Monday after anti-austerity candidates made unprecedented advances in local elections on May 24.

“There are two triggers” behind the selloff, said Daniel Lenz, lead market strategist at DZ Bank AG in Frankfurt. “The first is the Spanish elections, which have been a big defeat for the PP,” he said, referring to the conservative People’s Party. “The other one is, of course, Greece. There’s a lot of uncertainty.”

The yield on 10-year Italian bonds climbed seven basis points, or 0.07 percentage point, to 1.93 percent at 8 a.m. London time. The yield rose as much as 12 basis points earlier, the most since May 18. The 1.5 percent bond due in June 2025 fell 0.655, or 6.55 euros per 1,000-euro face amount, to 96.175.

Spain’s 10-year yield rose four basis points to 1.88 percent after increasing six basis points on Monday.

German 10-year yields dropped four basis points to 0.56 percent, the lowest since May 19.