Understood diplomacy with yours truly (5)
I believe the answer is:
tacit
'understood' is the definition.
(thesaurus)
'diplomacy with yours truly' is the wordplay.
'diplomacy' becomes 'tact' (I've seen this before).
'with' means one lot of letters goes inside another.
'yours truly' becomes 'i'.
'tact' going around 'i' is 'TACIT'.
(Other definitions for tacit that I've seen before include "Silent - understood" , "Implied without being put into words" , "Implied, not spoken" , "Understood without being directly expressed" , "Understood, implicit" .)