U.S. authorities took emergency action on Sunday to boost confidence in the banking system after the collapse of Silicon Valley Bank (SVB) threatened to trigger a broader financial crisis. Regulators said that from Monday, customers of the failed bank would have access to all their deposits. And to give banks access to funds, they created a new mechanism.

The collapse of the SVB triggered a massive rally in European and global bond markets.

On Monday, government bond yields fell in the eurozone as investors flocked to safe-haven assets.

The yield on two-year German bonds fell 34 basis points to 2.746%. This is the biggest one-day drop since 1995. Yields move inversely to prices.

And last week, the yield on 2-year bonds, which is very sensitive to ECB interest rate expectations, exceeded 3.3%.

There will likely be a slight rate hike by the European Central Bank (ECB) on Thursday. Expectations for the ECB's next decision changed sharply on Monday. Market pricing showed that traders see a 25 basis point hike as the more likely outcome, even though a 50 basis point hike seemed almost likely last week.

In U.S. markets, the 2-year Treasury yields fell 36 basis points to 4.232%, its biggest daily drop since 2008.

According to analysts at Goldman Sachs, the Federal Reserve will not raise interest rates at its meeting on March 22, as there is uncertainty about how to proceed due to the failure of the SVB.

Monday's pricing in money markets showed that traders believe there is about a 20% chance the Fed will leave rates unchanged and an 80% chance of a 25 basis point hike.

Last week, pricing suggested a 50 basis point rise was the most likely outcome.

The rush to safe-haven assets included long-term bonds.

The yield on German 10-year bonds fell 23 basis points to 2.228% after falling last February to its lowest level at 2.168%.

Italy's 10-year yield fell 16 basis points to 4.156%.

European stocks fell sharply, while U.S. stocks rose.

The European banks index (.SX7P) fell another 5% after falling 3.8% on Friday.

The European Central Bank is not planning an emergency meeting of its banking supervisory board after the collapse of the SVB.