(Updates market activity)
By Ross Kerber
BOSTON, Dec 3 (Reuters) - U.S. Treasury yields fell sharply on Tuesday, as tough trade talk from U.S. President Donald Trump and other world leaders triggered a flight to safety among investors.
The benchmark 10-year yield was 12.7 basis points lower at 1.709% in afternoon trade. Around noon, they had fallen as low as 1.693%, 14.3 basis points off their close on Dec. 2 and the biggest daily fall since May 2018.
Other global financial measures, including European bond yields and U.S. stocks, fell on Tuesday after Trump said he had no deadline for reaching a trade agreement with China and said it could come after the 2020 U.S. election.
He also hinted at new trade-related taxes on French goods.
“It’s global risk-off due to the trade uncertainty,” said Michael Pond, head of global inflation-linked research at Barclays.
The two-year yield, which typically moves in step with interest rate expectations, was down 8.2 basis points to 1.532% on Tuesday. Pond said that could reflect some anticipation of pressure on the U.S. Federal Reserve to cut rates further at some point. The two-year had its largest daily decline since Oct. 31.
Taken together, Trump’s trade comments suggested that uncertainty could last longer for investors and affect more events, such as Fed interest rate decisions, said Jim Barnes, director of fixed income for Bryn Mawr Trust.
“Those statements will weigh on investors’ minds,” he said.
Investors have been hoping the United States and China can defuse their trade tensions, which have strained ties between the world’s two biggest economies since 2017, the first year of Trump’s presidency.
U.S. officials have previously said a deal could happen this year, depending on China. But speaking in London on Tuesday, Trump said a trade agreement might have to wait until after the U.S. presidential election in November 2020.
Another reason for trade pessimism was France and the European Union saying they were ready to retaliate if Trump acts on a threat to impose duties of up to 100% on imports of champagne, handbags and other French products worth $2.4 billion.
Trump said there might be substantial taxes on French goods if the United States and France failed to find an agreement in a trade dispute over France’s plans for a digital tax. (Editing by David Gregorio and Dan Grebler)