LONDON, Sept 2 (Reuters) - Germany's 10-year bond yield

rose to a one-month high on Monday as bond supply was set to

pick up from the summer lull, while investors also watched the

results of two German regional state elections that dealt a blow

to the ruling coalition.

The Alternative for Germany (AfD) was the big winner in the

elections, looking set to secure over 33% of the vote in

Thuringia, becoming the first far-right party to win a regional

election since World War Two.

But while there might be a short-term impact, Commerzbank

does not expect any long-lasting damage to Germany's governing

coalition.

"Domestic political headlines after the disappointing

results for the federal government's coalition parties in the

regional elections probably won't have a lasting impact," said

Commerzbank rates strategist Rainer Guntermann.

"While the election results could further exacerbate the

conflicts within the coalition and within the coalition parties,

a break-up of the coalition and new elections are unlikely."

Germany's 10-year bond yield, the bloc's

benchmark, rose 3.5 basis points (bps) to 2.327%, its highest

level since July 31. Bond yields move inversely with prices.

The two-year yield, which is sensitive to changes

in interest rate expectations, rose 2.5 bps to 2.411%.

Euro zone bond supply is set to pick up this week after a

summer pause, which could also weigh on bond prices, analysts

said.

Italy's 10-year bond yield rose 4.5 bps to

3.738%, pushing the yield gap between Italian and German 10-year

bonds to 141 bps.