LONDON, June 17 (Reuters) -

German government bond yields rose on Monday in calmer

trading after a dramatic Friday when political jitters sent them

tumbling and pushed up the risk premium on French and Italian

debt.

Germany's 10-year bond yield, the benchmark for

the euro zone bloc, rose 6 basis points (bps) to 2.42%, after

falling 26 bps last week.

France's 10-year bond yield was down 1.5 bps

at 3.16%, while Italy's 10-year yield was 2 bps

higher at 3.93%.

French President Emmanuel Macron's decision to call a

parliamentary election has spooked investors who fear the move

could pave the way for Marine Le Pen's far-right Rassemblement

National to come to power and ramp up spending, adding to the

country's high debt levels.

Le Pen sought to allay some of those fears over the weekend,

saying she would not seek Macron's resignation and that she is

"respectful of institutions", in an interview with Le Figaro.

Philip Lane, the chief economist of the European Central

Bank, on Monday said the ECB did not need to step into the

markets, as recent market turmoil fuelled by political

uncertainty was not "disorderly".

"What we are seeing in the markets is a repricing, but it is

not in the world of disorderly markets right now," Lane said in

a Reuters NEXT Newsmaker interview at the London Stock Exchange.

The closely watched "spread" between French and German

borrowing costs stabilised after hitting its highest since 2017

last week.

The gap between French and German 10-year yields was at

around 77 bps, down 4 bps from Friday after climbing 29 bps last

week in its biggest weekly rise since 2011.

The Italian-German yield gap tightened 6 bps

to 151 bps, after rising 23 bps last week as investors bought

safe-haven German bonds, pushing their yields lower compared to

those of other countries.

"The market focus will firmly remain on (French bond) spread

dynamics after last week's wild ride," said Rainer Guntermann,

rates strategist at Commerzbank.

"Several days of stabilisation seem needed to calm

investors' nerves. However, unlike in 2017, there is no quick

fix in sight with French politicians not keen to compromise for

now and the ECB's hands tied."

Germany's two-year bond yield, which is more

sensitive to European Central Bank rate expectations, was 5 bps

higher at 2.81%.

Investors were looking ahead to U.S. retail sales data on

Tuesday, which should inform Federal Reserve policymakers about

the health of the American consumer after weak inflation data

last week raised hopes the U.S. central bank would be cutting

interest rates in September.

The Bank of England is widely expected to leave interest

rates unchanged at 5.25% in its meeting on Thursday, as it waits

for more progress on inflation in the services sector.