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By Marja Novak
LJUBLJANA, May 30 (Reuters) - The yield on Slovenia's 10-year benchmark bond jumped on Tuesday as demand sank after the Finance Minister Mateja Vranicar Erman offered to step down.
It rose to 1.292 percent from 0.958 percent on Monday, Reuters data showed.
Prime Minister Miro Cerar did not accept Erman's resignation, which was offered on Monday because of a probable delay to the sale of Slovenia's largest bank, state-owned Nova Ljubljanska Banka (NLB), sources told Reuters.
The yield rose to its highest since July 13, 2016, when the previous finance minister, Dusan Mramor, resigned for personal reasons.
Analysts said any further signs of political instability could push the yield higher, adding the yield would linger around 1 percent if political tensions calm down.
"Political crisis and complications are reducing Slovenia's credibility on the capital markets which in return increases bond yields. If the political tension eases, the yield is not likely to rise any further," Matej Simnic, an analyst at investment firm Alta Invest, said.
Slovenia has agreed to sell 75 percent of NLB in exchange for European Commission approval for state aid to the bank in 2013.
It planned to sell 50 percent of NLB through an IPO this year but the sale may be delayed. The government on Monday refused to give state guarantees to what could amount to about 400 million euros in compensation payable by NLB to Croatian banks who repaid depositors at NLB's predecessor Ljubljanska Banka.
Slovenia has been relucant to sell its major companies and banks in the past so the government still controls about 50 percent of the economy and about 44 percent of the banking sector. (Reporting by Marja Novak Editing by Jeremy Gaunt)