Italian bond yields jumped Tuesday, extending a recent surge as investors position themselves for the possibility that a new general election will be held in the eurozone's third-largest economy. The yield on the 2-year Italian bond leapt 175 percentage points to 2.369%, according to Tradeweb, and reached highs not seen since 2012. The 10-year yield climbed 42 basis points to 3.06%. Yields rise when prices fall. The selloff in bonds as well as in Italian stocks on Tuesday came after Monday's decision by Italian President Sergio Mattarella to block two antiestablishment parties from taking power by rejecting their euroskeptic candidate for economy minister. Mattarella then asked Carlo Cottarelli, a former International Monetary Fund official, to try to form a new government. "Cottarelli's administration may meet today and the new-Prime Minister has said he will look to pass a budget and then hold elections in early 2019. However, the new cabinet will require a confidence vote in parliament which it is unlikely to win and repeat elections in early autumn now look likely," said European analysts at RBC in a Tuesday note. Italy is at "serious risk of losing the irreplaceable asset of trust," Bank of Italy Gov. Ignazio Visco was quoted as saying Tuesday at the central bank's annual meeting in Rome.