Members of the far-right League, including party leader and Deputy Prime Minister Matteo Salvini, have been pushing for a scheme of incentives to boost the share of Italy's 2.3 trillion euro debt held domestically.
Discouraged by falling returns, Italians have come to hold just around 5 percent of Rome's debt pile.
The proposal comes at a time when Italy's debt costs are soaring due to declining demand from foreign investors, who worry about the government's plans to run higher deficits in defiance of European Union rules.
Finance Minister Giovanni Tria, a technocrat with no party affiliation, defended Italy's much criticised expansionary fiscal policy but distanced himself from the proposed scheme of tax incentives.
"I've read about this measure in the papers and it has never been discussed at the Treasury," Tria told reporters at the International Monetary Fund's annual meetings in Indonesia.
A source close to the matter told Reuters the Rome Treasury dislikes the idea because preferential treatment for domestic bonds would run counter to European rules.
Traders and analysts say the mooted caps of 15 billion euros, or 3,000 euros per person per year, mean the measures would have scant impact in helping Italy refinancing around 400 billion euros of debt a year.
Tria also gave short shrift to the notion, raised by Italy's other deputy prime minister, Luigi Di Maio, of Treasury involvement in the rescue of troubled flagship carrier Alitalia. Tria said this matter was only for the finance minister to decide.
He also argued for speeding up insolvency proceedings to help banks solve their issues with unpaid loans.
This has been a mantra for the European Central Bank and previous Italian administrations, but could ruffle feathers in the Five Star Movement, the left-leaning senior party in Italy's ruling populist coalition.
Tria looks weak and isolated after he caved in to party chiefs by agreeing to raise next year's fiscal deficit far above levels agreed with Brussels.
An economy ministry source and an institutional source told Reuters last week that Tria had told aides he planned to resign after the budget has been approved by parliament at the end of the year.
(Additional reporting by Giuseppe Fonte; Editing by Mark Heinrich)
By Francesco Canepa