Milan, April 23 - European markets broadly rallied Tuesday following successful bond auctions in Spain and a drop in Italian yields, which dipped below the 4.0% mark for the first time since November 2010 amid signs the country's ongoing political crisis may be reaching a conclusion. Increasing investor bullishness in Mediterranean debt paired with expectations that the European Central Bank may cut interest rates following continued weak European economic data also boosted markets. In Europe, France's CAC 40 was the best performer Tuesday, gaining 3.6% to close at 3783.1, followed by Spain's IBEX 35, up 3.3% at 8289.3 and Italy's FTSE MIB, which gained 2.9% to close at 16490.8. Frankfurt's DAX closed 2.4% higher at 7658.2, followed by London's FTSE 100, up 2.0% at 6406.1. Milan's stock exchange was boosted by expectations recently re-elected President Giorgio Napolitano would soon name a new government able to carry out a limited set of reforms to the country's political system as well as growth-boosting measures. The drop in the spread between Italy's 10-year government debt and its German counterpart, to under 270 basis points, boosted banks, which are a large component of the FTSE MIB. The spread - a key indicator of investor confidence in Italy's economy - ended the day at 268 basis points, down from 282 basis points Monday. The prospect that a lower spread would translate into lower borrowing costs for banks boosted Mediolanum (+5.7%), Mediobanca (+5.4%) and Unicredit (+5.2%). Other large caps, like Telecom Italia and Fiat, put in strong performances. Italy's former telecoms monopoly gained 6.3% on expectations the firm would soon reach some sort of integration agreement with mobile operator 3 Italia, owned by Hong Kong billionaire Li Ka-shing's Hutchison Whampoa. Italy's largest car-maker gained 6.2% following a report by investment bank UBS, which raised the shares to ''buy''.