Futures Pare Overnight Weakness After Wages Miss

In Tokyo morning trade, JGB futures are holding cheaper, -11 compared to settlement levels, but off overnight lows after weaker-than-expected wages and household spending data for December.

• Labour cash earnings rose 1.0% y/y, against a 1.4% forecast and 0.7% prior. Real earnings were -1.9% y/y, versus -1.5% forecast and -2.5% prior. Scheduled full-time pay (same base) in y/y terms rose 2.0% in line with the consensus and the prior outcome. Cash earnings, measured on an equivalent basis were +1.5% y/y (prior 2.0%).
• Household spending was down -0.9% m/m and -2.5% y/y (against a projected -2.0% and prior -2.9%).
• (BBG) Japanese wage growth strengthened less than expected in December while still showing signs of sufficient underlying momentum to keep the Bank of Japan on track to end its negative rate regime in the coming months. (See link)
• Cash JGBs are cheaper across the curve, with yields flat to 1.8bps higher. The benchmark 10-year yield is 0.9bp higher at 0.734% versus the Nov-Dec rally low of 0.555%.
• Swaps are little changed. Swap spreads are generally tighter across maturities.