Argentine province's finance squeeze fans yields
* Debt yields surge as financing doubts increase
* Rate on 2015 dollar-bond nears record high of 27.5 percent
* Governor Scioli to seek emergency economic powers
By Alejandro Lifschitz
BUENOS AIRES, July 6 (Reuters) - A cash crunch in Argentina's biggest province, Buenos Aires, is driving bond yields higher due to increasing investor doubts about the local government's ability to pay its debts as ties with President Cristina Fernandez sour.
The provincial government of Buenos Aires, which accounts for more than a third of Argentina's economic output, announced a raft of cost-cutting measures this week and plans to pay a bonus to public sector employees in installments.
Center-left Fernandez has only partially heeded to appeals for financial aid from Gov. Daniel Scioli, a former ally of the president who is increasingly seen as a potential successor to her in a presidential election in 2015.
The yield on the province's dollar-denominated 2015 bond closed on Thursday at a near-record high of 27.5 percent, more than 11 percentage points above a similar sovereign bond and almost twice the rate it paid at the start of May.
Provincial dollar-denominated bonds maturing in 2017 and 2018 remained close to their three-year highs of 25.63 percent and 22.58 percent, respectively. Continuación...