Treasury yields retreat

US Treasury yields dropped on Tuesday, in line with sterling's movements, as investors bought safe-haven debt after UK lawmakers voted against Prime Minister Boris Johnson's extremely tight timetable to approve his deal for Britain to exit the European Union.

German Bund, UK 10-year Gilt yields, and sterling fell on the day, their weakness spilling over to the Treasury market.

Lawmakers voted 322 to 308 against the so-called Programme Motion which set out a three-day schedule to rush his deal through the House of Commons.

Brexit hangs in the balance as the Oct. 31 deadline to leave the EU nears.

Earlier, lawmakers voted 329 to 299 in favor of the second reading of his 115-page Withdrawal Agreement Bill, a significant boost for Johnson five days after he struck a last-minute deal with the EU.

"Treasuries are following sterling directionally," said Jon Hill, vice president, rates strategy at BMO Capital Markets in New York. "The latest Brexit vote perpetuates more uncertainty."

Investors were also watching US-China trade talks. China's Vice Foreign Minister Le Yucheng said Beijing and Washington have made progress, but warned China would never trade away its core interests or allow other countries to undermine its security.

The United States has announced a "phase 1" deal with China on trade matters and suspending a scheduled tariff hike for October.

In afternoon trading, US 10-year note yields fell to 1.771% from 1.792% late on Monday. Earlier in the global session, 10-year yields hit a five-week high of 1.81%.

Yields on 30-year bonds were down at 2.257%, from 2.284% on Monday, touching a five-week peak earlier of 2.299%.

On the short-end of the curve, US two-year yields were slightly lower at 1.606%, from Monday's 1.615%.

US yields fell further after US existing home sales came in below the consensus forecast, although details suggested a more stable housing market than headlines indicated.

Ahead of next week's Federal Open Market Committee meeting, Tuesday's US two-year note auction showed solid demand, with Treasury accepting $44.18 billion of the $112 billion in bids submitted. The bid-to-cover ratio, a gauge of demand, was 2.7, higher than the last four auctions.

The offering stopped at a high yield of 1.594%, lower than the expected rate at the bid deadline. US two-year yields fell after a well-received auction.