NEW YORK: US Treasury prices rose, pushing benchmark 10-year yields to a three-week low on Monday, as risk appetite ebbed after drugmaker Merck ended its COVID-19 vaccine program and amid persistent worries about surging virus cases and their potential for prolonged lockdowns.

Yields on other long-dated Treasury maturities were also lower, with those on 30-year and 20-year bonds falling to two-week troughs.

The yield curve flattened on Monday, in line with the fall in long bond yields, with the gap between US two-year and 10-year notes dropping to 93.40 basis points, its narrowest spread in two weeks.

Tom di Galoma, managing director at Seaport Global in New York, said the rally in Treasuries extended after Merck pulled out of its COVID vaccine plan.

Merck & Co said on Monday it would stop development of its two COVID-19 vaccines and focus pandemic research on treatments, with initial data on an experimental oral antiviral expected by the end of March.

US coronavirus deaths surged to nearly 420,000 late on Sunday, with 25 million known cases, according to a Reuters tally.

In morning trading, the US benchmark 10-year yield fell to 1.063%, from 1.091% on late on Friday. It earlier fell to 1.06%, its lowest since Jan. 7.

"If we see 10-year yields get to 1%, then we'll see clients selling Treasuries again," said Seaport's di Galoma. "On the other side, 1.2% on 10-year yields is a key level we continue to monitor for a further sell-off in US rates."

US 30-year yields slid to 1.815% from Friday's 1.856%, after earlier dropping to a two-week low of 1.809%.

US 20-year bond yields also weakened to a two-week trough and was last down at 1.623%.

On the front end of the curve, US two-year yields were little changed at 0.125% from 0.133% on Monday.

The break-even inflation rate on 10-year TIPS, meanwhile, which measures expected annual inflation for the next 10 years, dropped to its lowest since late December. It was last at 2.02%, slightly up from Friday's 2.017%.

Later on Monday, the Treasury auctions $60 billion in US two-year notes, kicking off a record $183 billion in short-dated coupon offerings.

"If the latest trend is any indication, there is still ample appetite for 2s even after accounting for the supply upsizings, as the last five auctions have all stopped within 0.2 basis point of pre-auction WI (when-issued) levels," BMO said in a research note.

Investors are also on focused on this week's Federal Open Market Committee meeting.

"Given the given consistent refrain from policymakers of rates at the effective lower bound and QE (quantitative easing) continuing at the current pace, there is limited scope for any hawkish surprise," BMO wrote on Monday's note.