July 20, 2018 / 8:40 AM / 5 months ago

UPDATE 1-Italian bonds, stocks fall on renewed political concerns

(Adds details, background, on newspaper reports)

LONDON/ROME, July 20 (Reuters) - Italian bond yields rose and equities sold off on Friday after local media reported tensions within the coalition government and a newspaper interview with a lawmaker raised fresh concerns about Rome’s commitment to the euro.

Two-year government bond yields rose 8 basis points at 0.63 percent and 10-year bond yields were 6 bps higher at 2.57 percent. That pushed the gap over German Bund yields to 225 bps from around 218 bps late Thursday.

According to a report in the newspaper Corriere della Sera, Claudio Borghi, Italy’s head of the budget committee in the lower house of parliament, said Italy will come out of the euro sooner or later.

Traders also cited reports in Italian newspapers of tension between Economy Minister Giovanni Tria and the government’s two vice prime ministers. One reason is disagreement over appointments at some state-controlled firms including state lender Cassa Depositi e Prestiti (CDP), traders said.

Several newspapers reported the deputy prime ministers have issued an ultimatum to Tria that he should back the government’s nominees for key posts at the companies or resign.

La Stampa and Repubblica, in unsourced reports, said Luigi Di Maio and Matteo Salvini want Tria to back several nominations, which he has so far not done.

Tria prefers Dario Scannapieco, vice president of the European Investment Bank and a former Italian Treasury official, to become the new chief executive of CDP, sources said.

Di Maio’s 5-Star Movement supports Fabrizio Palermo, CDP’s current chief financial officer, and Salvini backs Di Maio, the reports said. Prime Minister Giuseppe Conte is trying to mediate the dispute, they said.

Italy’s FTSE MIB equity index fell one percent to underperform the broader European market. (Reporting by Dhara Ranasinghe and Kit Rees in London, Giulio Piovaccari in Milan, Philip Pullella; editing by Sujata Rao, Larry King)

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