September 28, 2018 / 6:32 AM / a year ago

Investors dump Italian bonds after ministers agree "budget for change"

LONDON, Sept 28 (Reuters) - Short-dated Italian borrowing costs jumped in early trade on Friday after key Italian government officials agreed a budget overnight that will see the country run a deficit in 2019 and beyond.

Italy’s government on Thursday targeted the budget deficit at 2.4 percent of gross domestic product for the next three years, defying Brussels and marking a victory for party chiefs over economy minister Giovanni Tria, an unaffiliated technocrat.

“There is an accord within the whole government for 2.4 percent, we are satisfied, this is a budget for change,” 5-Star leader Luigi Di Maio and League chief Matteo Salvini said in a joint statement after meetings with Tria.

Italy’s two-year bond yields — which have been most sensitive to political noise in recent months — were up about 13 basis points in early trade at 0.92 percent.

Other Italian yields were also higher on the day, with five-year yields up 23 bps at 2.14 percent and benchmark 10-year yields up 15 bps at 3.05 percent.

The closely-watched Italy/Germany 10-year bond yield spread was at its widest in three-weeks at 253.5 basis points. (Reporting by Abhinav Ramnarayan, editing by Karin Strohecker)

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