By Lukanyo Mnyanda Oct. 9 (Bloomberg) -- European government bonds dropped, pushing 10-year yields up from the lowest level in more than six months, as coordinated interest-rate cuts around the world sapped demand for the safest assets. Ten-year German bunds led declines, falling with their U.S. counterparts, after Treasury Secretary Henry Paulson signaled yesterday the government may invest in banks as it seeks to ease the deepening credit crisis. The European Central Bank, which cut its benchmark rate by half a point yesterday, loaned banks a record $100 billion for a day to ease market tensions. Bonds pared losses as European stocks reversed gains. The yield on the 10-year bund, Europe's benchmark government security, climbed as much as 14 basis points, the most since Sept. 19, and was 8 basis points higher at 3.88 percent by 4:22 p.m. in London. The 4.25 percent note due July 2018 fell 0.65, or 6.5 euros per 1,000-euro ($1,364) face amount, to 102.92. The yield on the two-year note increased 2 basis points to 3.06 percent. Yields move inversely to bond prices. The Dow Jones Industrial Average slid 1.4 percent, while the MSCI World Index lost 1.1 percent, after earlier rising by more than 2 percent. To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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