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LONDON, March 16 (Reuters) - Southern European bond yields jumped to multi-month highs on Monday as investors fled from riskier assets after a second rate cut by the U.S. Federal Reserve and coordinated central bank action to address the impact of coronavirus.
The Fed cut interest rates for the second time in less than two weeks on Sunday, to 0%-0.25%. Major central banks cut pricing on their swap lines to provide dollars to financial institutions around the world.
The moves failed to calm markets. Stocks and the dollar fell , moves that were echoed by Southern European debt, the riskier spectrum of the euro zone bond market.
Spain went into partial lockdown on Saturday as part of a 15-day state of emergency. Non-essential venues also closed in France, raising concern over the economic impact such drastic measures may have, especially for highly-indebted economies.
Spanish and Portuguese 10-year bond yields rose to 9 1/2- month highs at 0.74% and 0.93% respectively, up 12 to 14 basis points on the day .
The gap between Spain and Germany's 10-year yields - effectively the risk premium Spain pays on its debt - jumped to its highest since October 2018 at 136 bps.
French 10-year yields also soared as much as 14 basis points to 3 1/2-month highs at 0.14%
Italian 10-year yields were up 23 basis points at 2.03%, breaching the 2% mark for the first time since July.
"The momentum we've seen in the periphery is largely to do with the sentiment towards debt metrics in countries which after many, many years of quantitative easing and existing central bank support within the euro zone are going into another fairly significant if not larger crisis than the one before," said Rabobank strategist Matt Cairns.
The region's debt has been under pressure since last week, when European Central Bank chief Christine Lagarde said it was not the bank's job to "close spreads," or the risk premium on Southern European debt.
Lagarde apologized to her fellow policymakers for those comments, according to a Financial Times report on Sunday.
Higher-rated, core debt yields also rose on Monday, with Germany's 10-year benchmark up one basis point to -0.58%
European Union finance ministers will meet on Monday via video call to discuss the impact of the coronavirus. The European Commission, which predicted the outbreak would lead to a recession this year, wants to channel 37 billion euros ($41 billion) of existing EU funds to companies in greatest need and take a lenient approach to state aid rules.
(Reporting by Yoruk Bahceli; editing by Larry King)