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LONDON, Dec 7 (Reuters) - Italian bond yields fell on Wednesday after reports the government is preparing to rescue ailing lender Monte dei Paschi as hopes of a private recapitalisation fade.
Sources told Reuters the government is preparing to take a 2 billion euros controlling stake in the bank, while Italian daily La Stampa reported the country is set to ask euro zone bailout fund ESM for a 15 billion euro loan for Monte dei Paschi and other struggling lenders. Italy's treasury declined comment on the La Stampa report.
Ten-year government bond yields fell 5 basis points to 1.92 percent in early trading, just above three-week lows of 1.89 percent hit on Tuesday.
German equivalents -- the euro zone benchmark -- were flat at 0.37 percent. (Reporting by John Geddie, editing by Nigel Stephenson)