LONDON, Sept 10 (Reuters) - The Swiss franc dropped sharply against the dollar and the euro on Monday after the gap between Italian and German government bond yields narrowed on hopes the new government would be prudent with its fiscal policies.
The Swiss franc, sought during times of market stress, CHF=EBS EURCHF=EBS fell 0.4 percent against the dollar and 0.6 percent against the euro as the comments encouraged investors to pile into riskier assets.
The Italy/Germany 10-year bond yield spread shrank to 234 basis points DE10IT10=RR on Monday, its tightest level in six weeks, and 55 bps below last week's widest levels.
This after Italian Economy Minister Giovanni Tria said on Sunday that Italian bond yields will fall as the new government starts to implement its policies to boost the economy with prudent fiscal measures.
