LONDON, May 7 (Reuters) - Turkey's dollar-denominated government bonds saw their biggest selloff in months on Tuesday, after news that Istanbul's mayoral elections would be annulled and re-run sent the lira tumbling to its lowest since October.
The challenge by President Tayyip Erdogan's AK Party to the March 31 election result in Istanbul, which showed a narrow victory for the opposition CHP party, has compounded investor worries about politics in Turkey in recent weeks.
The fall in bonds was led by 2030-onwards debt with 2038 , 2041 and 2043 issues all down between 1.6 and 1.8 cents according to Tradeweb data.
It was set to be the biggest daily fall for most of them since March. Istanbul, Turkey's main commercial hub, accounts for one third of the country's economic activity. (Reporting by Marc Jones; editing by Helen Reid)