UK gilts plunge after Italy’s 5-star, League Party pushes towards formation of a government

The United Kingdom’s gilts plunged Tuesday after Italy’s 5-Star and the League Party were seen to gather efforts towards the formation of a new government after days of political uncertainties that rattled financial markets to the core.

The yield on the benchmark 10-year gilts, jumped 5 basis points to 1.24 percent, the super-long 30-year bond yields surged 4-1/2 basis points to 1.72 percent and the yield on the short-term 2-year traded 4 basis points higher at 0.63 percent by 10:00GMT.

Italy’s anti-establishment 5-Star Movement and far-right League have renewed efforts to form a coalition government after the president rejected their eurosceptic economy minister pick at the weekend, a 5-Star source said on Wednesday.

The parties are trying to find “a point of compromise on another name” for the economy ministry, the source said. The coalition may also be widened to include another right-wing party, the Brothers of Italy, the source added.

Meanwhile, the FTSE 100 traded 0.22 percent higher at 7,648.25 by 10:15 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -120.60 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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