By Abhinav Ramnarayan and Danilo Masoni
LONDON (Reuters) - Italy's bond yields rose, its stocks fell and the euro weakened on Thursday after the Italian government appointed two eurosceptics to head key finance committees.
Claudio Borghi and Alberto Bagnai, both from the far-right League, were picked to head, respectively, the Budget Committee in the lower house of parliament and the Finance Committee in the upper house Senate.
The appointments renewed market jitters about the new coalition government's commitment to the single-currency bloc, after economy minister Giovanni Tria reassured investors a few days ago by saying Italy had no intention of leaving the euro.
"If Tria's interview reassured markets, it would make sense that now (this news) could create worries," said JCI Capital portfolio manager Alessandro Balsotti.
He added that following the recent strong rebound in Italian government bonds it was worth taking out some profit.
Italy's 10-year government bond yield rose 14 basis points to a one-week high of 2.72 percent (IT10YT=RR), while two-year borrowing costs rose 25 bps to 0.84 percent (IT2YT=RR).
The closely-watched gap between 10-year bond yields in Italy and benchmark euro zone issuer Germany was its widest in a week at around 236 bps.
Italy's FTSE MIB (FTMIB) extended losses to slide 1.4 percent, on track for its biggest fall in two weeks. The bank stocks index (FTIT8300) was down 2.1 percent, with Unicredit (MI:CRDI) and Intesa Sanpaolo (MI:ISP) prominent fallers.
A professor in economic policy, Bagnai published "Il tramonto dell’euro" ("The sunset of the euro") in 2012, a book described by League leader Matteo Salvini as a must for any library.
"Though it's not clear how prominent his role will be, his views on the euro are very clear, so there has been a backlash in the market," said Mizuho strategist Antoine Bouvet.
"Also, Spain is auctioning some bonds this morning, which makes yields even more sensitive."
Southern European bond yields often rise when there are big auctions in the region, as investors sell bonds to make room for more supply.
Spain sold 5 billion euros ($5.8 billion) of debt at a quadruple bond auction.
The euro meanwhile dropped half a percent to its lowest level in nearly a year at $1.1508 (EUR=), with traders citing the spike in Italian bond yields, dollar strength and the rallying Swiss franc as triggers.
"Sometimes you have to trade and ask questions later. A spike in Italian yields would be reason enough to sell euros," said Neil Jones, head of hedge fund FX sales at Mizuho.
As Italian bonds came under pressure, investors snapped up safe-haven German bonds. Germany's 10-year bond yield fell to a three-week low at 0.346 percent.