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LONDON, Nov 9 (Reuters) - Italian 10-year bond yields hit
the 7 percent level that is widely deemed unsustainable after an increase in the cost of using the country's bonds to raise funds offset hopes for more reforms in Italy as its prime minister agreed to step down.

The rise in the 10-year yield on Wednesday are reflecting
investors' concerns that they may not get their money back a
worry that was also reflected in two-year bond yields and the cost of insuring against Italian debt default.

Two-year yields jumped 57 basis points to 6.98 percent
and were close to converging with those of 10-year
debt, while five-year BTPs yielded 20 bps more than 10-year
BTPs.

Italy's blue-chip FTSE MIB <.FTMIB> index extended losses,
down 3.3 percent by 0932 GMT, while the pan-European
FTSEurofirst 300 <.FTEU3> was down 1.3 percent at 970.58 points.