(Bloomberg) — Asian equities look set for declines Tuesday while bonds rallied in early trading as the collapse of Silicon Valley Bank continued to reverberate across global markets.

Policy-sensitive two-year government bond yields tumbled around 20 basis points in New Zealand, as did the rate on Australia’s three-year maturity. Shares dropped in these two markets, with financial stocks prominent among the decliners. Futures contracts for benchmark indexes in Japan and Hong Kong were also lower.

In the US on Monday, the yield on the two-year Treasury note plunged in its biggest one-day slump in decades while tech stocks rebounded from last week’s rout. The two-year yield dropped by more than a half-percentage point, logging the biggest three-day retreat since Black Monday of October 1987.

The dollar held most of its losses in early Asian trading after erasing its gains for the year on Monday. The yen, Australian dollar and offshore yuan all appreciated more than 1% against the greenback on Monday.

The market turmoil has caused a swift reassessment over the direction of Fed policy. Swaps traders are now pricing a less than 60% chance the Fed will hike by another quarter percentage-point later this month.

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

Expectations had weighed a hike of as much as 50 basis points after Chair Jerome Powell addressed lawmakers last Tuesday. Traders will soon turn their attention back to US consumer price index report, which could drive further bets on the Fed’s next move.

The S&P 500 closed Monday down 0.2%, after bouncing between gains and losses amid a rout in bank shares while the policy-sensitive Nasdaq climbed 0.8%, the most in over a week. The fallout from SVB’s collapse prompted President Joe Biden to promise stronger regulation of US lenders, while reassuring depositors that their money is safe.

The KBW Bank Index logged its biggest one-day drop since the start of the Covid-19 pandemic. Asian investors will also have their focus on the region’s banking stocks, which were under some pressure Monday, particularly in Japan.

Treasury Secretary Janet Yellen said her office would protect “all depositors” at SVB. The government actions will also include a new lending program that Fed officials said would be big enough to protect uninsured deposits in the wider US banking sector. Still, the sudden closing of New York’s Signature Bank by state regulators Sunday underscored the urgency of stabilizing the financial system.

Wall Street’s so-called “fear gauge” spiked, with the Cboe Volatility Index rising above 30 for the first time since October.

Here is how Wall Street is weighing the Fed’s next move:

We forecast a 25bp Fed hike, but Powell talk and high CPI point to close call. The threat to our views comes from Fed Chair Powell. While Powell opened the door to a large March hike, he did not walk through it, noting that the upcoming decision will be determined by “the totality of the data.”

The Fed decision will incorporate two additional factors. First, this week’s CPI report. Second, the Fed will consider the potential for financial stress to build.

— Marko Kolanovic, JPMorgan Chase & Co. strategist

The Fed has to be off the table for now. They pushed on rates until something cracked, well guess what? Something cracked.

To see QT stop would not be surprising, and maybe something to support the market. I think we’re back in crisis mode, and remember, to me, bank runs are way way way more important than inflation, so that’s what they’ve got to be arresting.

— Peter Tchir, head of macro strategy at Academy Securities

Pressure on banks dampens the rate outlook some, but decisive action on financial stability gives the Fed latitude to continue with rate hikes; 50 in March is not impossible as it would have been under a weak financial stability response and ongoing runs but looks very implausible – we still see 25 with a high bar to pause.

— Krishna Guha, Evercore ISI head of central bank strategy

Speculation about what the Fed’s going to do before we even see CPI is probably ill-founded. But if you look at the fed funds futures, they’re pricing in cuts in the fourth quarter and they’re pricing in the credible potential — like a 50% chance — that the Fed does nothing at the March meeting. So there’s too much noise around what else happens, what does this mean for monetary policy.