Cash Curve Bear-Steepener After Stronger-Than -Expected Wages Data

In Tokyo morning trade, JGB futures are sharply lower, -114 compared to settlement levels, after extending overnight weakness after today’s data.

• June wage data have mostly surprised on the upside. Headline labour nominal cash earnings were +4.5%y/y, against a 2.4% forecast and revised 2.0% gain in May. Real cash earnings were +1.1% y/y, against a -0.9% forecast and prior -1.3%. This is the first positive print for real wages since Q1 2022.
• The same sample base figures were a little more mixed though. Cash earnings surged 5.4%y/y, against a 3.5% forecast and 2.6% prior. Scheduled pay was slightly softer than forecast at +2.7% y/y (2.9% forecast).
• Still, scheduled same sample base pay hit fresh cycle highs in y/y terms, with recent annual wage negotiations continuing to aid this backdrop. Elsewhere, hours worked fell -2.8%y/y, while employment was +1.1% y/y.
• The Japanese authorities will be hoping the positive real wage trend translates into better real household spending outcomes.
• Cash US tsys are ~4bps cheaper in today’s Asia-Pac session, extending the reversal in the direction seen yesterday.
• The cash JGB curve has bear-steepened, out to the 30-year, with yields 2-10bps higher. The benchmark 10-year yield is 8.2bps higher at 0.872% ahead of today’s supply.
• The swaps curve has also bear-steepened, with rates 2-7bps higher. Swap spreads are tighter.