Futures Extend Overnight Gains Despite Stronger Wages Data

In Tokyo morning trade, JGB futures have extended overnight gains, +38 compared to settlement levels, despite stronger than expected Wages data.

• April wage outcomes were firmer than forecast in terms of the headline results. Labour cash earnings rose 2.1% y/y (against a 1.8% forecast and a revised 1.0% March gain). Real earnings were -0.7%y/y, against a -0.9% forecast and -2.1% in March.
• The Japanese authorities will be looking for further improvement in real wage outcomes (trending back above 0%), which is a key policy objective to ensure a recovery in consumption spending and sustainably achieving the 2% inflation target.
• The recently negotiated wage outcomes, where workers secured a +5% wage gain will have impacted today's data. The BoJ suggests around 40% of the annual gain will be reflected in the April data, while 80% will factored in by July (see this BBG link).
• May’s Jibun Bank PMIs printed: Composite rose to 52.6 from 52.3 in April, and Services fell to 53.8 from 54.3 in April.
• Cash JGBs are richer across benchmarks, with yields flat (1-year) to 3.6bps lower (5-year). The benchmark 10-year yield is 3.3bps lower at 0.997% versus the cycle high of 1.101% set last week.
• Swaps are richer apart from the 20-30-year zone, with rates 2bps lower to 1bp higher. Swap spreads are mostly wider.