Bull-Flattening Ahead Of 10Y Supply

In Tokyo morning trade, JGB futures are stronger, +7 compared to settlement levels, after dealing in a relatively narrow range so far in today’s session.

• This comes despite November labor and real cash earnings printing much weaker than expected at +0.2% y/y and -3.0% y/y respectively versus expectations of +1.5% (+1.5% prior) and -2.0% (-2.3% prior).
• The slump in real wages is above earlier 2023 trough points, with a -4.1% y/y drop recorded in January. Still, the trend is not an encouraging one around hopes for a return to positive real wages growth.
• Today's data is likely to reinforce official calls for stronger nominal wage growth. Several companies and union groups have stated increases this year could be meaningful.
• The cash JGB curve has bull-flattened, with yields flat to 2bps lower. The benchmark 10-year yield is 1.2bps lower at 0.579% ahead of today’s supply.
• It is also worth mentioning that today’s auction takes place after the BoJ announced yesterday buying of 10-year to 25-year debt that suggested it will purchase less of those bonds in all of January, in line with what it signalled late last year. (See Bloomberg link ICYMI)
• Swaps curve has also bull-flattened, with swap spreads wider.