(Updates at 1035 GMT)

By Harry Robertson

LONDON, June 17 (Reuters) - Euro zone bond yields ticked

higher on Monday in calmer trading after a dramatic Friday when

political jitters sent German yields 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 3 basis points (bps) to 2.39%, after

falling 26 bps last week.

France's 10-year bond yield was up 2 bps at

3.153%, while Italy's 10-year yield was 3 bps higher

at 3.942%.

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.

European Central Bank chief economist Philip Lane 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 told 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, little changed from Friday after climbing 29 bps

last week in its biggest weekly rise since 2011.

The Italian-German yield gap stood at 152 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 1 bp

higher at 2.772%, after falling 19 bps last week.

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 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.

(Reporting by Harry Robertson

Editing by Bernadette Baum and Shinjini Ganguli)