Analysts wary of reports of 11th hour deal on Italian government

Parties from across Italy's political spectrum are reportedly attempting to thrash out an 11th hour agreement on forming an interim government.

According to local media reports, the options being analysed range from the creation of a caretaker government, under the stewardship of Carlo Cottarelli, until new elections are held in September or October, to a coalition administration including the Five Star movement, League and Brothers of Italy, with Cottarelli serving as Finance minister.

Nonetheless, analysts at Barclays Reserach were skeptical, telling clients on Wendesday morning that: "In absence of official confirmation from any of the parties potentially involved, except for Giorgia Meloni, leader of FdI who was reported last night by Il Corriere della Sera as saying she would consider forming a government with 5SM and L, we refrain from taking a strong view.

"In general, we believe the above three options could help stabilise market sentiment, at least in the near term, including option 3 (a coalition between 5SM, League and Brother of Italy), provided such a government was joined by a strong pro EU and fiscally responsible Finance Minister like Carlo Cottarelli or somebody else with a similar standing."

Reacting to the above, longer-term Italian government bond yields pared some of their gains from the previous session.

As of 1026 BST, the yield on the benchmark 10-year Italian government note was 13 basis points lower to 3.03%, but remained far above the 1.74% seen on 3 May.