Euro zone bond yields fall sharply, Italian-German spread below 200 bps

May 10 (Reuters) - Euro zone government bond yields fells sharply on Tuesday, extending falls as investors covered short positions having recently pushed yields to multi-year highs on aggressive European Central Bank tightening bets.

The 10-year Bund yield, the bloc's benchmark, was down 10 basis points (bps) at one point. It was last down 8 bps on the day at around 1%. It hit its highest since August 2014 at 1.189% early on Monday.

Italy's 10-year bond yield fell over 15 bps. That pulled the Italian-German 10-year bond yield spread below 200 bps, down 10 bps on the day at 195.8

"The medium-term trend doesn't change, but with the U.S. yield at 3%, Bund at 1.1% and BTPs at 3%, it makes sense to cover short positions, which is what is happening right now," said Massimiliano Maxia senior fixed income specialist at Allianz Global Investors.

U.S. 10-year Treasury yield fell 6.5 bps to 2.97% . (Reporting by Stefano Rebaudo; editing by Dhara Ranasinghe, editing by) ;))