LONDON, Oct 19 (Reuters) - The cost of insuring exposure to Italy's banks jumped on Friday, after the country's government bond market sold off sharply as the European Union slammed Rome's draft budget. Five-year credit default swaps in UniCredit rose to 204 basis points, from a closing price of 194 bps on Thursaday and was the highest since Dec 2016. CDS in Intesa Sanpaolo widened eight bps to 212, and Mediobanca rose 10 basis points, data from IHS Markit showed.
That move coincided with a sharp selloff in Italian banks, which are vulnerable to a spike Italy's government bond yields because of their large holdings of sovereign debt. An index of Italian bank stocks was down 1.9 percent, while the broader Italian market was 0.8 percent lower.
Reporting by Dhara Ranasinghe; editing by Sujata Rao