Treasury yields drop on reports trade deal may not come this year

NEW YORK (Reuters) - Treasury yields dropped on Wednesday on news a “phase one” U.S.-China trade deal may not be completed this year, according to Reuters sources.

Negotiations to finalize a deal may extend into next year, trade experts and people close to the White House said, as Beijing presses for more extensive tariff rollbacks, and as the Trump administration counters with heightened demands of its own. New U.S. tariffs on $156 billion in Chinese goods are set to go into effect on Dec. 15, including on holiday gift items like electronics and Christmas decorations.

Benchmark 10-year Treasury note yields US10YT=RR were last down 5.6 basis points at 1.730%. The two-year yield US2YT=RR was down 2.8 basis points at 1.568%, flattening the yield curve US2US10=TWEB to 16.3 basis points from 18.5 at Tuesday's close.

Yields moved lower in step with the major U.S. stock indexes as investors sought protection in safe-haven assets, also boosting currencies like the Japanese yen JPY= and Swiss franc CHF=.

Reporting by Kate Duguid; Editing by Chris Reese and Bernadette Baum