LONDON (Reuters) - Italian stocks pared losses and bond yields came off the day's highs on Monday after Reuters reported senators from the center-right party could rebel against Silvio Berlusconi if he continues to threaten to bring down the government.
As many as 20 senators from the center-right party of Silvio Berlusconi are ready to form a breakaway group unless the former premier backs down on his hard line to bring down Italy's government and head to elections, a top member of the party told Reuters on Monday.
Italy's FTSE MIB index pared losses, with the index down 1.7 percent by 9:15 a.m. ET. Italian yields came off the day's highs but were still up 17 basis points on the day at 4.59 percent.
"This raises the likelihood Prime Minister (Enrico) Letta will be able to fashion a government from his own (party) together with disaffected members of (Berlusconi's party) and possibly also the 5-star movement were Berlusconi to withdraw his party from the ruling coalition," Rabobank strategist Richard McGuire said.
(Reporting by London Markets team)