(Clarifies milestone in first paragraph)
LONDON, Oct 2 (Reuters) - The gap between Spanish and German government borrowing costs was close to its widest in four months on Monday as investors were unsettled by a violent police crackdown on an illegal independence vote in Catalonia.
Regional officials said 90 percent of voters in Sunday’s ballot favoured breaking away from Spain, opening the door to a unilateral declaration of independence in the industrial powerhouse which accounts for a fifth of Spain’s economy.
Spanish government bond yields rose 7 basis points to 1.69 percent when trading began on Monday, according to Tradeweb data, their highest since mid-July and outstripping a 2 basis point rise in benchmark German equivalents.
The gap between Spanish and German 10-year bond yields stretched to 121 bps, just below the 122 bps breached on September 26, which was the highest since June 12.
The sharp rise in Spanish yields also pulled Italian peers to their highest in 2-1/2 months, up 5 bps at 2.22 percent . The euro lost about half a percent against the dollar. (Reporting by John Geddie, editing by Nigel Stephenson)