Negotiations between the United States and China have been briefly paused. This halt raises concerns about Treasury Secretary Bessent’s upcoming testimony before Congress tomorrow. These discussions aim to tackle various economic and trade issues between the two nations. The results of these talks could significantly impact global markets and international relations. Bessent’s testimony is expected to discuss these recent events and their possible effects. The delay in negotiations may change the focus of her remarks, which were meant to highlight progress and challenges faced in the talks. The situation is uncertain, and the pause in negotiations leaves questions about when talks will restart and what decisions will be made next. Many are watching closely to understand how this might influence both domestic and global economic policies. With the talks on hold, Bessent’s testimony may carry more significance than originally thought. Instead of just updating Congress on progress, her comments might now emphasize the obstacles faced, financial sensitivities, and what might be required when talks resume. This changes the context—her appearance before Congress is now more about managing expectations after an unexpected silence. Markets, which often anticipate changes, will likely analyze her tone as much as her words. Earnings reports have begun to account for potential delays in cross-border supply improvements and regulatory alignment. We’ve seen fluctuations in interest rates and currencies react not only to official announcements but also to shifts in policy. If Bessent lacks clarity tomorrow, it could signal that the economic relationship may enter a slower, more unpredictable phase. From our perspective, we view trade-policy news as short-term triggers, especially for rate-sensitive investments. We’ve made slight adjustments to timing and position sizes. With spread benchmarks already reflecting partial outcomes, waiting for an announcement that may not come offers little safety. It’s wiser to take action now rather than rush at the last minute. Traders looking to hedge macro risks should be cautious about exposure to real yields and cross-currency bases, where reactions to policy disappointments may be swift. Many are already leaning towards flatteners, anticipating that ongoing trade tensions will dampen front-end sentiment. Flow patterns in interest rate swaps also indicate hesitation to commit to specific directions, meaning relative value plays are likely to perform better than directional trades in the coming sessions. What happens next depends not only on when talks resume but also on how firmly either side communicates its goals. If Bessent provides even a narrow outlook on timelines or updated objectives, we anticipate spreads to react—potentially strongly—given the current pause. At this point, any indication of resolution or further delays will be significant. We are maintaining stricter limits on risk-on positions but are keeping liquidity available in case prices move drastically on new headlines. As Congress becomes a platform for potential public discussions of trade objectives, we cannot rely solely on traditional negotiation cycles or diplomatic signs. Tomorrow’s agenda will focus on more than just transparency; it will also set the tone for how much policy uncertainty markets will need to absorb directly. For now, it’s essential to remain flexible, respond to secondary effects, and seize any mispricing motivated by political drama rather than economic fundamentals.

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