TREASURIES-US yields drop to multi-week lows as tech selloff drives safe-haven bids

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US 10-year, 20-year, 30-year bond yields hit four-week lows

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US two-year yields fall to lowest in seven weeks

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US three-year to seven-year yields slide to six-week troughs

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US 2/10 yield curve flattens

(Recasts throughout, adding analyst comments, Treasury auctions, yield curve, Fed meeting, NEW YORK dateline, updates prices)

By Gertrude Chavez-Dreyfuss and Alun John

NEW YORK/LONDON, Jan 27 (Reuters) - U.S. Treasury yields tumbled to multi-week lows on Monday, tracking steep declines in equities, as investors sought the safety of government bonds, with tech stocks sinking on the emergence of a Chinese discount artificial intelligence model.

The benchmark 10-year Treasury yield fell to a four-week low and was last down 7.1 basis points at 4.552%. Both 20-year and 30-year bond yields also slid to four-week troughs.

On the front-end of the curve, the two-year yield, which is typically tied to Federal Reserve policy expectations, fell to its lowest in seven weeks and was last down 5.6 bps at 4.216% . The three-, five-, and seven-year yields all slid to six-week lows.

The rush to bonds came as stocks, particularly tech stocks, fell around the world, as the popularity of a Chinese discount artificial intelligence model DeepSeek jolted investors' faith in the profitability of AI and the sector's voracious demand for high-tech chips.

Wall Street indexes fell in early trading, with the Nasdaq down nearly 3% on the day. AI giant Nvidia plunged more than 13% on Monday to $123.62.

"This is a flight-to-quality bid for Treasuries. People are moving out of equities and going into fixed income trying to understand the news that came out over the weekend with regard to technology," said Jim Barnes, fixed income at Bryn Mawr Trust in Berwyn, Pennsylvania.

"What exactly does that mean? Given the runup we have seen in Treasuries, it was kind of easy to sell risk assets and go into safe-haven Treasury assets."

YIELD CURVE FLATTENS

The U.S. Treasury yield curve on Monday, meanwhile, flattened or reduced its steepness from the previous session. It showed what traders call a "bull flattening" scenario where long-term interest rates are falling faster than shorter-dated ones. The gap between two-year and 10-year Treasury yields narrowed to 34.1 bps, compared with 35.1 late Friday.

A "bull flattener" occurs when there is a flight-to-safety bid on Treasuries, which is what is currently happening in the market.

Bond investors are also preparing for two auctions on Monday: $69 billion in two-year notes and $70 billion in five-year debt.

"Today's Treasury supply (2s and 5s) will undoubtedly benefit from the reversal in risk assets, and the absence of meaningful economic data ahead of the Fed suggests that any move will have plenty of room to run," BMO Capital Markets wrote in a research note.

Also a focus this week is the Federal Open Market Committee monetary policy meeting, with the announcement of the outcome on Wednesday. The Fed is widely expected to keep its benchmark overnight interest rate in the 4.25%-4.50% range, in what market participants described as a "dovish pause".

"The Fed is not going to act without knowing policies from the new administration," Vincent Reinhart, chief economist, at BNY Investments, said.

"They're in an awkward position about providing guidance. They can't explain forecasts that depend on certain government policies."

With the latest sell-off in stocks, the U.S. rate futures market has priced 50 bps in cuts this year, or two rate reductions of 25 bps each, up from 36 bps late on Friday, according to LSEG calculations. The rates market for most of this month had priced in just one rate easing.