The failure of Silicon Valley Bank has torn into global markets, with investors ripping up their forecasts for further rises in interest rates and dumping bank stocks around the world.

Government bond prices soared on Monday, with two-year US Treasury yields recording their biggest one-day drop since 1987, as fund managers ramped up bets that the US Federal Reserve would now leave interest rates unchanged at its next scheduled monetary policy meeting this month to steady the global financial system. As recently as last week, markets were braced for another half-percentage point rise.

Wall Street’s S&P 500 and the tech-heavy Nasdaq Composite fell 1 per cent and 0.8 per cent respectively shortly after the New York open, giving up earlier gains in futures markets which came after US regulators said on Sunday that SVB depositors would be fully repaid and unveiled emergency funding measures in a bid to contain the fallout. In the UK, the Bank of England brokered a deal to sell the UK arm of SVB to HSBC for ￡1.