ROME, Nov. 10 (Xinhua) -- Italy's financial markets calmed Thursday on the prospect of a new government led by the country's respected economist Mario Monti.
Milan stocks first saw a decline by more than one percent but swung back to green and gained 1.5 percent in morning trading.
In a treasury auction earlier on Thursday, Rome also managed to raise five billion euros, though at the cost of a record high interest rate of 6.087 percent.
The 10-year bond yields dropped to 6.98 percent, just below the critical 7-percent threshold, with its spread against the German benchmark bond falling from 574 basis points to 520.
The 10-year bond yield reached over 7 percent on Wednesday, after Prime Minister Silvio Berlusconi's announcement that he would step down, but only after the Parliament approves an austerity package.
The jittery markets calmed on Thursday when Mario Monti emerged as a possible leader of a new government.
Foreign Minister Franco Frattini said he supported an emergency government of national unity led by the former European commissioner.
"He (Monti) has an international profile that no-one can deny," Frattini said, noting he had worked "very hard" during his term in Brussels.
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