Morning Bid: Bond yields recoil on disinflation buzz

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Key Points

After bumpy start to the third quarter, stocks and bonds rallied together on Monday - with both two- and 10-year Treasury yields recoiling sharply back below 5% and 4% thresholds respectively...

Spurred by more signs of ebbing U.S. inflation ahead of Wednesday's critical June consumer price report, Wall Street stocks also recovered ground on Monday.. U.S. small cap stocks led the way, with the Russell 2000 (.RUT) jumping 1.6% to clock its best day in more than a month - ahead of both the NFIB June small business survey later on Tuesday and the onset of the second-quarter earnings season...

A New York Fed survey showed on Monday that household inflation expectations for the year ahead fell to 3.8% last month, the lowest in more than two years..

And if bond markets were looking for another reason to rebound at the margin, the Fed's top regulatory official Michael Barr laid out a sweeping plan to increase capital requirements for the largest U.S. banks in the wake of recent bank failures, a move met with criticism from the industry...

After China showed on Monday that it was flirting with outright deflation last month, Britain relayed a screed of mixed signals - accelerating wage growth to match record highs, rising unemployment, mortgage rates soaring to 15-year highs and the Bank of England talking tough on more policy tightening...

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