Investors sold Italian government debt Monday after Prime Minister Matteo Renzi announced his resignation following a crushing defeat in a constitutional referendum, ushering in a period of heightened uncertainty in the eurozone's third largest economy.

Government bonds were a notable black spot in markets Monday, as European stocks climbed and the euro pared earlier losses.

Italian bond yields rose sharply as prices fell, while debt from other riskier countries such as Portugal and even France underperformed versus Germany, Europe's largest economy.

The gap in yield between 10-year Italian and German debt widened by around 0.07 percentage point to 1.702 percentage points in early European morning trade, according to Tradeweb.

The Italian referendum is the first of a series of pivotal votes in Europe over the coming year. Mr. Renzi's resignation opens the door to parliamentary elections next year in Italy. It is also seen as benefiting the antiestablishment 5-Star Movement, which has called for a non-binding referendum on the country's membership of the euro.

In France, current polling suggests National Front leader Marine Le Pen, who wants to pull France out of the euro, will advance to second round of the presidential election next spring.

Investors will be weighing whether greater political turbulence in Europe has dented local bonds against the prospect of more central bank stimulus.

The European Central Bank meets on Thursday. Prior to the Italian referendum, most economists expected the ECB to extend its €80 billion purchases of mostly government debt, which are currently slated to finish in March.

Many believe the ECB's buying will prevent riskier government bonds from entering the kind of tailspin seen at the height of the eurozone debt crisis in 2010 to 2012. Back then, Italian 10-year yields topped 7%. They are currently at 2.009%.

Write to Christopher Whittall at christopher.whittall@wsj.com

(END) Dow Jones Newswires

December 05, 2016 05:35 ET (10:35 GMT)

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