We have studied the C14 hexagonal Laves phase of YbAg2 at normal conditions and under external pressure up to 19 GPa by the time-differential perturbed angular γ − γ correlation spectroscopy (TDPAC) using 111 Cd probe nuclei. Under pressure the valence of Yb undergoes a two stage transition from 2.8 to 3. The two stage scenario is characterized by two distinct quadrupole frequencies of 111 Cd probes in silver sublattice, monotonically increasing with pressure and saturating at 8 and 16 GPa. Our experimental data are compared with the density functional studies of the electron band structure of YbAg2, whose results are used for discussion and interpretation of these experiments. We have found that there are two different electric field gradients at inequivalent silver sites and that 4d-states of silver participate in metal bonding, allowing for the formation of the hexagonal Laves phase.