* New PM Conte promises radical change (Updates prices, adds Monte quotes)
By Abhinav Ramnarayan
LONDON, June 5 (Reuters) - Italy’s government bonds sold off on Tuesday, facing renewed pressure after new Prime Minister Guiseppe Conte promised to bring radical change as he sought parliamentary backing for an anti-establishment government.
Conte’s remarks echoed much of the policy programme set out in a coalition accord signed by the 5-Star Movement and the right-wing League - an agenda of tax cuts and higher welfare spending.
“The speech shows there’s no signs that any of their proposals will be watered down, which is bearish for BTPs,” said Mizuho rates strategist Antoine Bouvet, referring to Italian government bonds.
“But there are no real surprises there - I think it’s the case of the market being sensitive, it’s more of a knee jerk reaction.”
Conte’s comments ended a four-day recovery in Italian bond prices.
Italy’s government bond yields, which move in the opposite direction to the price, rose as much as 20 basis points across the curve.
Ten-year Italian borrowing costs were 18 basis points higher on the day at 2.74 percent and 2-year yields briefly jumped back above 1 percent.
Italy’s 10-year bond yield spread over Germany widened to 236 bps, from 213 bps the day before.
Mario Monti, Italian prime minister during the euro zone debt crisis in 2011, said Italy risks being put under the supervision of the “troika” - the European Central Bank, European Commission and International Monetary Fund.
Conte addressed the Senate, flanked by the leaders of two formerly fringe parties that had shoved aside mainstream parties at an election in March to form a coalition with Conte, a little-known law expert, as its head.
“It will be Conte that represents Italy but I don’t think he will be the initiator of policy without talking to the two party leaders first,” said Jan von Gerich, chief analyst at Nordea.
“So that means the focus for markets will be the plans from 5-Star and the League.
Earlier in the session, euro zone government bonds had gleaned some comfort from a strong set of business surveys from Italy and Spain.
Germany’s 10-year bonds, seen as a safe haven in uncertain times, was in demand and the yield dropped back below the 0.40 percent mark, down 4 bps on the day. (Reporting by Abhinav Ramnarayan; Additional reporting by Dhara Ranasinghe; Editing by Janet Lawrence)