Market Reacts to Disinflation Buzz, Dollar Slides, and Bond Yields Recoil

Bond yields have retreated, boosting investor sentiment, as concerns about disinflation in the U.S. grow despite mixed signals globally. Both two- and 10-year Treasury yields fell below key thresholds, while stocks rallied on Monday. The drop in yields can be attributed to signs of declining U.S. inflation, including a drop in household inflation expectations and a decrease in used-vehicle prices. Additionally, a New York Fed survey showed that consumer credit plunged in May. While some bond market repricing may be due to an expected drop in U.S. CPI inflation, other factors, such as speeches from Fed officials and regulatory plans to increase capital requirements for U.S. banks, also influenced the market. The global inflation outlook remains uncertain, with China showing signs of deflation and the UK experiencing mixed economic signals.