* C$ flat at C$1.0166 vs US$, or 98.37 U.S. cents
* Bond prices rise as Italian yields surge
By Claire Sibonney
TORONTO, Nov 7 (Reuters) - The Canadian dollar was little changed against the U.S. dollar on Monday morning as political turmoil in Italy overshadowed a government coalition deal in Greece to help secure its latest bailout package and avoid a default.
Italian Prime Minister Silvio Berlusconi faced rebellion from his party ahead of a critical parliament vote on Tuesday to debate austerity cuts, with the opposition also preparing a motion of no confidence in the leader. For details, see [ID:nL6E7M60C8]
In Greece, Prime Minister George Papandreou sealed a deal with the opposition on a crisis coalition to approve an international bailout. [ID:nL6E7M707J]
"What happens in Europe really completely sets the tone for the market risk environment that exists globally," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
Riskier assets cut earlier losses in choppy trade on market rumblings that Berlusconi could resign soon and after a Greek government official said Papandreou and opposition leader Antonis Samaras will hold more talks on Monday. [ID:nA8E7M501F] and [ID:nL6E7M60C8]
"Whether it's Greece and the ongoing shenanigans with respect to Papandreou ... or whether it's now Italy and the issues facing Berlusconi, it's all about structural financial reform in Europe and how tough it is to enact legislation and find stable enough governments to get it going," added Spitz.
At 8:05 a.m. (1305 GMT), the Canadian dollar CAD=D3 stood at C$1.0166 versus the greenback, or 98.37 U.S. cents, little changed from Friday's North American session finish at C$1.0167 to the U.S. dollar, or 98.36 U.S. cents.
Spitz said there was U.S. dollar support near the 20-day moving average at C$1.0123 and the 50-day moving average at C$1.0103. He noted U.S. dollar resistance around C$1.0210-1.0230, where there was a congestion of offers for most of last week.
Canadian government bond prices advanced across the curve, following U.S. Treasuries higher as a surge in Italian yields on political uncertainty brought back fears that the euro zone debt crisis may spiral out of control. [US/]
The two-year bond CA2YT=RR rose 2 Canadian cents to yield 0.923 percent, while the 10-year bond CA10YT=RR climbed 16 Canadian cents to yield 2.145 percent. (Editing by Jeffrey Benkoe)