SONIA OPTIONS: Call Condor buyer

• US rates opened lower and then extended losses driven by the US and Iran exchanging heavy fire in the Persian Gulf.
• A small uplift on a recently released podcast of President Trump saying the US is working on a deal with Iran and that Iran has agreed they won’t have a nuclear weapon was short-lived and unsurprisingly hasn’t moved the needle.
• FF cumulative hikes from 3.62% effective: +0.5bp Jun, +3bp Jul, +8.5bp Sep, +12.5bp Oct, +20.5bp Dec building to +31.5bp Mar 2027 and +34.5bp Dec 2027.
• SOFR futures are 3.5-4 ticks lower through reds and greens, with the peak implied yield seen at 4.015% (M7) as it climbs nearer to the Middle East conflict highs of ~4.10% seen two weeks ago having closed on Friday at 3.915%.
• New Fed Chair Warsh has hired conservative policy analysts Paul Winfree and Daniel Heil as temporary advisers, according to people familiar with the matter per Bloomberg reporting. From the story: " Winfree previously served in the White House during President Donald Trump’s first term in office and wrote a chapter on the Fed for the Heritage Foundation’s Project 2025 initiative that was critical of the central bank.”
• Today sees notable data releases including the monthly ADP report for May and ISM Services. Further Fedspeak:
  • 0900ET – Gov. Barr (voter) in moderated discussion at community bankers association (no text). He said May 15 that the Iran conflict is making inflation worrisome and that inflation is an overwhelming risk with the economy booming.
  • 1600ET – Dallas Fed’s Logan (’26 voter, hawk) in moderated discussion (text + Q&A). She dissented to the implied easing bias in the April FOMC statement as she’s increasingly concerned over the outlook for inflation whilst the labor market has been stable with low unemployment.
  • 1400ET – The Fed’s Beige Book will also be released for a useful update on liaison program evidence. The April edition saw heavy mention of the Middle East conflict but the portrayal of the economy in this edition was not substantially different, and arguably even more robust. 

US President Donald Trump's comments on the 'Pod Force One' podcast have been noted by markets, albeit with only a knee-jerk reaction (CROSS ASSET: Risk-Positive Flows Stemming From Trump's Comments On Iran Fade). NY Post reports some of the broader comments delivered by Trump. 

• Regarding Iran's Supreme Leader, Mojtaba Khamenei, Trump says, “He’s involved, absolutely. [...] If you believe the stories, he’s missing a lot of different parts,[...] They say he is giving approval, [...]. But we seem to be getting along quite well.” On a potential meeting: "Yeah, I’d like to meet him. I’d love to meet everybody. I would like to meet him and we probably will meet at some point, depending on how it all works out.” This remains an extremely unlikely scenario, given Iran's staunch animosity towards the US gov't.
• Regarding an Axios report claiming Trump held an expletive-filled phone call with Israeli PM Benjamin Netanyahu, Trump effectively confirms the story, saying he had called the Israeli PM "f--king crazy". Adds “I was a little bit perturbed at his constantly fighting with Lebanon.”
• On the broader Iran conflict, Trump (once again) says there will be a deal "fairly quickly". On reaction in oil markets, Trump says, “Everyone said it was going to be $300, $400 a barrel, it’s 98 dollars a barrel but that’s not a big price to pay if you look at the possibility of them having a nuclear weapon".
• On the Strait of Hormuz, Trump offers no concrete view, saying it could be closed "through Labor Day [7 September]," but that "I think it’s unlikely. I think that we’ll have it. I think this will resolve itself fairly quickly.”