The two-year Treasury yield climbed — following a three-day swoon that was the biggest in decades amid the tumult — after data showed inflation remained elevated in February. Swaps traders now expect the Fed to lift rates by a quarter percentage point. Odds of an increase had slipped to nearly 50-50 on Monday. The dollar was little changed versus major peers.

US consumer prices rose 0.4% in February, meeting economists’ forecast. The closely watched core CPI number — which excludes food and energy — increased 0.5%, just ahead of the median estimate of 0.4%.

The two-year note — the most sensitive to interest rates — climbed to 4.3%. Plunging rates gripped Wall Street’s attention yesterday, when the yield dropped more than a half-percentage point in the biggest move since the 1980s.

Treasuries have been whipsawed in recent days — with a measure of volatility climbing to the highest since 2009 — and banking shares plunged as the collapse of Silicon Valley Bank and two other US lenders prompted wagers the Federal Reserve will pause its hiking cycle and even cut interest rates to stabilize the financial system.

Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, expects that the data will keep the Fed on track to raise rates 25 basis points next week.

“Given the bank troubles, this report isn’t bad enough to put 50 bps back on the table, but if the Fed wants to maintain credibility on inflation, then this report says they have to hike again next week and not signal they are done,” Essaye wrote.

Goldman Sachs Group Inc. economists as well as asset managers from the world’s largest actively managed bond fund, Pacific Investment Management Co., said the Fed could take a breather on the policy rate following the collapse of SVB. Nomura Holdings Inc. economists took it one step further, saying the Fed could cut its target rate next week.

“Overall, this is an inflation update that, taken as a sole input, would suggest that a 25 bp hike next week is a foregone conclusion,” said Ian Lyngen, rates strategist at BMO Capital Markets. “Alas, the regional banking stress leaves next week’s decision as a wild card until there is greater clarity on the success of limiting the contagion to the rest of the banking sector from SVB/Signature.”

Elsewhere in markets, oil extended declines. Gold slid after rising in the three previous sessions as traders turned to haven assets.

Here’s what else Wall Street is saying:

“Although the number was higher in core MoM than expected, it is probably not sufficiently so to corner the Fed into hawkishness at the next meeting. Therefore risk assets are able to breathe a sigh of relief here, as the Fed probably has the option to go easy at the next meeting, if they feel the banking system requires it.”

— Peter Chatwell, head of global macro strategies trading at Mizuho International

“The CPI number is no game changer. After the events last week, a 50bps appeared unlikely going into the data print today and the slightly stronger than expected core inflation print puts speculation of a Fed pause to a rest.”

“The Fed is on track for another 25bps hike next week. Equities should rebound somewhat as the Fed becomes more predictable for now. But the impact from higher rates on the economy is just starting to be felt and will likely become more and more visible as the year moves on.”

— Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin

“Policymakers may still feel forced to press pause on rates, despite evidence the hot inflation is still a risk, unwilling to be blamed for making a bad situation worse. While smaller banks remain under pressure, there are concerns that bigger banks could become more risk averse in lending, which could dip the economy into a sharper downturn.

— Susannah Streeter, head of money and markets at Hargreaves Lansdown

“Equity markets are still priced for a rosy future which looks increasingly fanciful with each passing day. I’m sure the lack of further selloff in the rates markets today will comfort some but the reality is that treasuries can sense what equities are blissfully or willfully ignoring – this sort of monetary tightening from such an extreme starting position is unequivocal bad news for a fragile and highly levered system.”

— James Athey, investment director at Abrdn

“Every 24 hour period that passes where nothing else goes wrong, for the time being, maybe for the next week or so, is going to be encouraging and probably contributing to an upswing in equity prices across the board. But that doesn’t mean we’re going to leave this crisis, assuming that we’ve seen the worst of it, without any impairment at all.”

“It’s a go-ahead for 25 basis points.”

— Brian Nick, chief investment strategist at Nuveen

“Continued hawkishness should still be warranted, or at least that’s what the Fed will likely want to state.  It puts the Fed in a tight spot. Higher interest rates amid banking turmoil might not be what investors want to see. However, a pause in a 0.25% hike next week only delays the inevitable.”

— Charles Hepworth, investment director at GAM Investments

Key events this week:

• China retail sales, industrial production, medium-term lending, surveyed jobless rate, Wednesday
• Eurozone industrial production, Wednesday
• US business inventories, retail sales, PPI, empire manufacturing, Wednesday
• Eurozone rate decision, Thursday
• US housing starts, initial jobless claims, Thursday
• Janet Yellen appears before the Senate Finance Committee, Thursday
• US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 2% as of 11:29 a.m. New York time
• The Nasdaq 100 rose 2.3%
• The Dow Jones Industrial Average rose 1.4%
• The Stoxx Europe 600 rose 1.6%
• The MSCI World index rose 1.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0728
• The British pound fell 0.2% to $1.2159
• The Japanese yen fell 0.8% to 134.34 per dollar

Cryptocurrencies

• Bitcoin rose 6.8% to $25,884.82
• Ether rose 5.5% to $1,764.8

Bonds

• The yield on 10-year Treasuries advanced five basis points to 3.62%
• Germany’s 10-year yield advanced 16 basis points to 2.42%
• Britain’s 10-year yield advanced 12 basis points to 3.49%

Commodities

• West Texas Intermediate crude fell 0.6% to $74.33 a barrel
• Gold futures fell 0.2% to $1,912.20 an ounce