LONDON, Dec 22 (Reuters) - Italian and Spanish 10-year government bond yields rose in opening trading on Thursday following reports of a possible state bailout for ailing Italian lender Monte dei Paschi di Siena.
Monte dei Paschi has all but failed to pull off a last-ditch rescue plan and a state bailout for the ailing Italian bank now looks inevitable, sources told Reuters on Wednesday.
Italy's 10-year government bond yield was up 2 bps to 1.84 percent by 0815 GMT, while the Spanish equivalent was up a similar amount to 1.34 percent.
"A bailout in itself is good news, but the big question is whether it is in line with European law," said DZ Bank strategist Daniel Lenz. "It's an open question whether there will be a solution everybody is fine with."
EU rules require that bond holders are tapped first in any bank bailout before taxpayer cash, if its more that 1 billion euros, can be used. (Reporting by Abhinav Ramnarayan, Editing by Marc Jones)