* Reports of OPEC cut push up U.S., German bond yields
* Gap between Germany and U.S. 10-year yields grows
* ECB report soothes nerves before Italian, Austrian votes
* Extra focus on Italy after Monte dei Paschi rescue plan
By Abhinav Ramnarayan
LONDON, Nov 30 Germany's benchmark bond yields
rose on Wednesday as oil prices surged after sources told
Reuters OPEC had agreed to limit crude output.
Sources in the producer group said the Organization of the
Petroleum Exporting Countries had decided on its first oil
output cuts since 2008.
U.S. Treasuries led the global bond sell-off, with 10-year
yields rising 8 basis points to 2.38 percent after Brent crude
at one point topped $50 a barrel, erasing Tuesday's losses, as
expectations for a deal to cut output grew.
Brent last traded at $49.94, up 7.7 percent.
The yield on Germany's 10-year bond reversed
the morning's fall and was up 1.6 bps at 0.25 percent.
"Clearly the OPEC news has had a big impact on Treasuries,
and Bunds have moved in sympathy with this," said Mizuho
strategist Peter Chatwell. "Having said that, the spread between
Bunds and Treasuries has widened further today."
The gap between 10-year borrowing costs for Germany and the
United States stretched to 213 bps, within a whisker of its
widest since at least 1990.
Earlier, bond yields fell on expectations the European
Central Bank would step in to buy Italian government bonds
should this weekend's referendum on constitutional change go
against Prime Minister Matteo Renzi.
A Reuters report on Tuesday that the ECB was ready to
temporarily step up purchases of Italian government bonds if its
borrowing costs spiked was the primary driver.
"This reaction function does indicate that the ECB is aware
of the important support that quantitative easing lends to the
periphery," ING strategist Padhraic Garvey said.
In early trading, Italian and Austrian government bonds
recovered this week's losses before votes on Sunday in each
country. Austrians will choose a president in a repeat election
that could produce the first far-right head of state in the
However, by 1500 GMT, the yield on Italy's 10-year bond
was up 1.8 bps to almost 2 percent.
Polls suggest that a "No" vote is likely in Italy's
referendum and this could render Renzi's position untenable.
It could in turn jeopardise Italy's ailing banking sector
just as lender Monte dei Paschi embarks on a rescue
Most other euro zone bonds were also flat to 3 bps higher.
Greece was the exception, its 10-year government bond yields
hitting a two-year low of 6.62 percent, down as much as 43 bps
on the day. Analysts cited a Wall Street Journal report that the
euro zone's bailout fund had drawn up proposals that could cut
Greek debt sharply.
The ESM confirmed its managing director would present euro
zone finance ministers with a paper outlining possible
short-term debt relief for Greece. It said the proposal had yet
to be endorsed by the ministers, who meet in Brussels on Dec. 5.
The chair of the Eurogroup of euro zone finance ministers
said on Tuesday that European lenders should be "realistic" in
the fiscal targets they set for Greece after 2018, suggesting
that the current budget targets may be eased.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Mark Heinrich)