September 19, 2018 / 2:52 PM / a month ago

Italian govt bond yields rise as much as 10 bps on fear of higher budget spending

LONDON, Sept 19 (Reuters) - Italian government bonds fell sharply on Wednesday, with yields on short-dated debt rising as much as 10 basis points on the day on renewed fears members of the ruling coalition would push through high-spending policies in the budget.

Two-year yields rose to a high of 0.739 percent while five-year yields touched 1.84 percent, Reuters data showed.

Ten-year bond yields rose 7 bps to 2.86 percent, adding to earlier rises.

Analysts said the market extended losses after an Instagram post by Italian prime minister Giuseppe Conte reiterated insistence on universal basic income. The ruling parties are seeking to pack at least portions of their main campaign promises into next year’s budget, including a basic income for the poor.

“The prime minister posted on Instagram that the citizens income, the basic income would be part of the budget, which prompted a response in the market,” said Martin van Vliet, senior rates strategist at ING.

Reporting by Virginia Furness and Sujata Rao

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