EM CEEMEA CREDIT: SGLSJ: H1 out, strong YtD spread performance, ratings on neg

Option desks report better upside call trade in SOFR & Treasury options overnight, much better SOFR volumes as they segue from earlier put interest. Underlying futures firmer, projected rate cut pricing mostly steady vs. late Monday (*) levels: Jul'25 at -0.8bp, Sep'25 at -16.6bp (-17.4bp), Oct'25 at -28.1bp (-28.2bp), Dec'25 at -44.4bp (-44.5bp). Year end projection well off early July level of appr -65.0bp.

• SOFR OPTIONS
  • Block, 20,000 SFRZ5 96.25/96.50/96.75/97.00 call condors, 3.25 ref 96.075
  • Block, 5,000 SFRQ5 95.81/95.93/96.00 broken call flys, 3.75 ref 95.84
  • 1,500 SFRZ5 95.25/95.62/95.75 broken put flys ref 96.075
  • 9,200 SFRZ5 96.25/96.50/96.75/97.00 call condors ref 96.05
  • 2,000 SFRZ5 96.25/0QZ5 97.18 call spds, 0.5 
  • +10,300 SFRQ5 95.87/95.93 call spds, 1.25 vs. 95.835/0.15%
  • Block, 2,500 SFRV5 96.18/96.43 call spds, 4.75 ref 96.07
  • 3,000 SFRU5 96.62/97.25 2x1 put spds, 6.5 ref 96.655
  • 2,000 SFRH6 95.87/96.25 2x1 put spds over 96.87/97.12 call spds ref 96.28
  • 9,000 SFRV5 96.25/96.31 put spds over 96.50/96.75 call spds, 3.5 net ref 96.07
  • +1,200 SFRU5 96.00/96.18, 1.0
  • 1,250 SFRU5 95.68/95.75/95.81 put flys, 0.75 ref 95.835
  • +1,300 0QV5 96.31 puts, 3.0
• Treasury Options
  • 12,000 TUV5 104.12/104.37 call spds ref 103-25.62
  • +1,500 wk2 TY 107.75/108.75 put over risk reversals, 0.5 net
  • 2,450 TYU5 112/113 call spds, 8 ref 110-25
  • 1,000 TUU5 103.75/104.12 call spds, 4.5 vs. 103-18.87/0.20%

• Treasury futures are following German Bund's lead ahead of the NY open, climbing off modest overnight lows, albeit on light volumes ahead flurry of morning data ahead tomorrow's FOMC rate announcement.
• Tsy Sep'25 10Y futures currently +5.5 at 110-30 on volume of 215k (+30k over the last hour). Technical resistance at 111-14+, Jul 22 high. A clear break of it would highlight a stronger reversal and open 111-28, the Jul 3 high.

The European Commission has published a Q&A  sheet on the deal on tariffs and trade announced over the weekend. The deal has been talked up as a compromise that will avoid the worst-case scenario of 30% US tariffs on EU goods and EU retaliation via the 'anti-coercion instrument'. Nevertheless, there remain holes with regard to details of what the deal will cover and how it will be implemented.

• The most important section of the document may indeed come at the end, where it notes, "The political agreement of 27 July 2025 is not legally binding. Beyond taking the immediate actions committed, the EU and the US will further negotiate, in line with their relevant internal procedures, to fully implement the political agreement."
• The document highlights the "single, all-inclusive US tariff ceiling of 15% for EU goods", which includes the most-favoured nation tariff rate. However, it then notes that if the MFN tariff is higher than 15%, only the MFN tariff will apply, not the 15% ceiling (implying that 15% is not in fact an all-inclusive ceiling). The 15% rate will apply to vehicles, and, when they are implemented by the US, on pharmaceuticals.
• As MNI's Policy team noted on 28 July, the US itself has yet to confirm the 15% ceiling, while there are also potential legal pitfalls should the Commission seek to push a deal through without a full ratification process by member states (see 'MNI: EU States Broadly Back EU-U.S. Deal - Officials', 28 July).