Holding A Bear-Steepening At Lunch Following Earnings Data, BOJ Rinban Results Due

At the Tokyo lunch break, JGB futures remain sharply cheaper, -34 compared to the settlement levels, but above the session low. The key driver for today’s extension of yesterday’s post-30Y auction sell-off has been labour and real cash earnings data, which printed on the higher side of expectations.

• Labour and Real Cash Earnings printed +1.5% y/y and -2.3% y/y respectively versus expectations of +1.0% and -3.0% and +0.6% (revised) and -2.9% prior. The Q3 GDP deflator was also higher than expected at +5.3% y/y.
• Bloomberg reports that Mari Iwashita, chief market economist at Daiwa Securities Co. believes successive statements from the Bank of Japan governor and his deputy on the groundwork for an exit to negative policy were an important signal and indicate that the necessary conditions for a policy revision have been met. (See link)
• The cash JGB curve has extended yesterday’s bear-steepening, with yields 1.2bps to 7.3bps higher (30-year). The benchmark 10-year yield is 4.1bps higher at 0.799% versus Wednesday’s low of 0.622%.
• BOJ Rinban operation results are due soon.
• The swaps curve has also bear-steepened, with rates 2-8bps higher. Swap spreads are wider.