OIL PRODUCTS: Singapore Total Oil Inventories Rise to Highest Since December

• The Tnotes/Bund spread fully clear the 190.00bps handle and now eye a test to the next support area noted at 184.61bps.
• While the Bund has managed to recover from its overnight low, following the decent Risk Off flow, on Tariffs Risk, US Tnotes has been in the Green overnight and has extended gains throughout the European Morning session.
• The US 10yr Yield has tested the 38.2% retracement of the Sept/Jan range at 4.3440%, managed a 4.3328% low.
• Looking further out, for the March contract, the 4.30% Yield level would be seen at 110.14+.

(Chart source: MNI/Bloomberg).

Dallas Fed President Logan said Tuesday the Fed should eventually purchase more Treasury bills to return the central bank's assets to a more neutral posture but that would likely take many years to achieve.

• "Although I view a neutral mix of purchases relative to issuance as appropriate in the long run, it would make sense in the medium term to overweight purchases of shorter-dated securities so as to more promptly return the Fed’s holdings to a neutral allocation," said Logan.
• At present, the Fed’s portfolio is "significantly overweight longer-term securities and underweight Treasury bills" and "when we eventually reach an efficient level of reserves and need to begin expanding the portfolio in line with growth in demand for our liabilities, those purchases will also be small relative to existing holdings," she said. "In this context, it could take many years to reach a neutral mix of holdings by structuring our purchases to be proportional to issuance."
• Logan's prepared remarks did not touch on a potential near-term slowdown or pause of the Fed's balance sheet drawdown, which according to minutes last week was debated at the central bank's January meeting.

The tariff-driven risk-off move has promoted modest dovish repricing in GBP STIRs.

• BoE-dated OIS now shows ~56bp of cuts through year-end vs. ~52bp late yesterday. The contract sticks comfortably within the recent range, with current levels printed as recently as last Tuesday.
• Further forwards, the strip moves back towards pricing 20bp of cuts through May, with the next 25bp cut fully discounted through June.
• SONIA futures flat to +4.0, with some contracts threatening to break above last week’s highs.
• Late Monday saw BoE dove Dhingra stress the need for further rate cuts given her views surrounding ongoing consumption weakness as she warned that gradual rate cuts of 25bp per quarter would still leave policy rates in restrictive territory come the end of the year.
• This afternoon will bring comments from BoE chief economist Pill, as he delivers closing remarks at the Bank’s BEAR conference.
• A reminder that we have suggested that Friday’s address from Deputy Governor Ramsden could provide the most interesting round of BoE communique this week. See our Gilt Week Ahead for more on our thinking surrounding that matter.