Futures Holding Overnight Gains, 30-Year Supply Today

In morning Tokyo trade, JGB futures are trading near the overnight closing levels, showing a modest increase of 7 compared to the settlement levels, as the initial strength observed at the opening gradually diminishes.

• On the data front, April Labour cash earnings undershoot expectations printing +1.0% y/y (+1.8% est.) versus 1.3% prior, while real earnings print -3.0% y/y (-2.0% est.) versus -2.3% prior. Household spending also surprised on the downside, printing -4.0% y/y (-2.4% est.) versus -1.9% prior. Neither of the trends looks favourable, and at the margin will weigh on expectations for any near-term BoJ policy shift. Note that real spending was down -1.3% in m/m terms. Real wages are weaker for the 13th straight month.
• Cash JGBs are slightly richer across the curve beyond the 1-year zone. The benchmark 10-year yield is 0.2bp lower at 0.432%, below the BoJ's YCC limit of 0.50%. The 30-year is 0.4bp richer, showing little concession, ahead of today’s supply.
• Swap rates are 0.1-0.6bp lower across the curve with swap spreads tighter beyond the 3-year zone.