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A Chinese trade delegation, led by Vice Premier He Lifeng, and a US delegation, led by Treasury Secretary Scott Bessent, have arrived at the venue in Stockholm, Sweden, for the third round of trade talks. 

• MNI noted in the Political Risk Week Ahead that there is increasing speculation that another 90-day extension will be agreed upon to avoid the imposition of 100%+ tariffs. SCMP reported overnight that another 90-day pause is expected, during which time “the two nations will commit to not impose additional tariffs on each other, nor escalate the trade war by other means.”
• During a press conference with European Commission President Ursula von der Leyen yesterday, Trump said the US is “very close to a deal with China." Trump added: “We really sort of made a deal with China, but we’ll see how that goes.”
• A breakthrough in talks could facilitate a meeting between Trump and Chinese President Xi Jinping in the Autumn. Trump said on Friday he would likely visit China at Xi’s invitation in the “not too distant future.”
• Discussions are likely to focus on thorny issues related to tech and critical mineral export controls, and Chinese purchases of sanctioned Russian and Iranian oil. Beijing is expected to press the US to reduce tariffs related to Fentanyl.
• FT reported earlier: “The US has frozen restrictions on technology exports to China to avoid hurting trade talks with Beijing and help [Trump] secure a meeting with [Xi]..." 

US SOFR/TREASURY OPTION SUMMARY

SOFR & Treasury options were rather paired on lighter volumes overnight - two way positioning ahead of Wednesday's FOMC annc. Underlying futures weaker after paring losses in early London trade, curves steeper with 2s10s +1.392 at 47.641, 5s30s +.909 at 97.968. Projected rate cut pricing running steady to mildly cooler vs. late Friday (*) levels: Jul'25 at -0.05bp, Sep'25 at -16.7bp (-16.7bp), Oct'25 at -27.6bp (-28.1bp), Dec'25 at -43.6bp (-44.2bp). Year end projection well off early July level of appr -65.0bp

• SOFR Options:
  • 2,000 SFRU6 96.62/97.25 2x1 put spds
  • 2,000 SFRQ5 95.87/96.00/96.12 call flys ref 95.825
  • Block/screen, 4,000 SFRU5 95.81/95.87/95.93 put flys, 0.75 ref 
  • 2,000 SFRH6 96.81/97.06 call spds ref 96.295
  • 3,000 SFRU5 96.75/97.62 strangles ref 96.675
  • 1,000 SFRU5 96.75/97.37 2x1 put spds vs. 97.00/97.62 1x2 call spds
  • 6,000 0QZ5 95.87/96.12/96.37 put flys, 3.0
  • +1,000 SFRQ5 95.875/96.00/96.12 call flys, 1.5 vs. 95.845/0.10%
  • +1,000 SFRU5 95.875/96.00/96.12 call flys, 2.75 vs. 95.855/0.08%
• Treasury Options:
  • 4,000 USU5 115/117/118 broken call flys
  • over 4,600 TYU5 110 puts, 20
  • over 4,900 TYU5 111 calls, 37
  • over 4,600 TYV5 109.5 puts, 31 ref  111-01
  • 3,000 TYU5 106.25 puts, 1
  • +5,000 wk1 TY 111 puts, 22
  • +5,000 wk1 TY 111 calls, 26
  • +4,850 TUU5 103.625/104.25 call spds, 7.5-8

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• President Donald Trump will meet UK Prime Minister Keir Starmer for a bilateral meeting before heading to the east coast of Scotland.   
• Starmer is expected to press Trump for a better deal on steel and pharmaceutical tariffs. Starmer will also advocate for stronger US support for Ukraine and Gaza, and shore up US commitment to NATO and AUKUS.
• Trump said he will reduce the 50-day deadline for Russia to reach a ceasefire with Ukraine.
• Markets are braced for one of the busiest weeks ever for US data.
• Trump and European Commission President Ursula von der Leyen announced a preliminary deal that will see the EU levied with a 15% tariff. The deal has received a mixed response from European leaders, who see it as the least worst option.
• US and Chinese officials will begin a third round of trade talks in Sweden today, aimed at extending the tariff truce. A breakthrough could facilitate a meeting between Trump and Chinese President Xi Jinping in the Autumn.
• Commerce Secretary Howard Lutnick said there will be "no extensions" on the August 1 tariff deadline.   
• OMB Director Russell Vought accused Fed Chair Powell of ‘fiscal mismanagement”.
• Senate Majority Leader John Thune (R-SD) is aiming to get a first FY26 ‘minibus’ through the Senate this week.
• Thailand and Cambodia agreed to a ceasefire, following pressure from Trump.
• Poll of the Day: Democrats' image sinks to its lowest point in decades. 

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