WASHINGTON, May 19 (Reuters) - U.S. Treasury Secretary Janet Yellen told bank CEOs on Thursday that more mergers may be necessary after a series of bank failures, CNN reported on Friday, citing two people familiar with the matter. The Treasury readout did not mention bank mergers, but CNN quoted sources as saying that consolidation was discussed. Yellen told Reuters in an interview in Japan last week that pressures on U.S. regional bank earnings may lead to more concentration in the sector and regulators will likely be open to such mergers. But the report that she gave a similar message directly to bank CEOs, alongside news that talks over the U.S. debt ceiling were at an impasse, had a significant impact on markets on Friday. Two-year Treasury yields initially dropped by some 11 basis points on Friday after the report, while benchmark 10-year yields fell by about five basis points.

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