LONDON, March 14 Reuters Shortend euro area yields rose on Tuesday, following sharp drops the previous day as investors weighed the impact of Silicon Valley Bank39;s SVB collapse on the outlook for European Central Bank policy.

Germany39;s 2year yield was down by as much 27 basis points bps to 2.425 in early trade, its lowest since Jan. 19. It later pared those price gains, leaving the yield up 3 bps at 2.733.

The 2year yield, which is highly sensitive to ECB interest rate expectations, stood above 3.3 last week.

The SVB collapse triggered a mammoth rally in global bond markets on Monday, which saw the biggest oneday decline in the 2year Treasury yield since 1987, at 56 bps. Yields move inversely to prices.

On Sunday, U.S. regulators took measures to stem the consequences of the bank39;s collapse and shore up confidence in the banking system, but markets are assuming interest rates will increase less than previously thought.

Ahead of the ECB39;s meeting on Thursday, markets are fully pricing in a 25 basis point hike and around a 50 chance of a larger halfpoint move. They had priced in a 50 basis point hike with near certainty last week.

The ECB terminal rate is expected to be around 3.3 in October this year, from above 4 previously.

While the Fed might become more dovish in the short term, we don39;t believe this will happen with the ECB, at least during this week39;s policy meeting, Massimiliano Maxia, a senior fixedincome specialist at Allianz Global Investors,…