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ACGBs (YM +1.5 & XM +0.5) are slightly stronger after today’s wages data.

• The Q2 WPI rose 0.8% q/q leaving annual inflation at 3.4% y/y after a recent trough at 3.2% in Q4 2024 and 4.1% in Q2 2024. Public sector quarterly wage gains outpaced the private sector for the third consecutive quarter at 1.0% q/q compared with 0.8%. Public wage growth is now up 0.1pp to 3.7% y/y, while private was 3.4% y/y. The RBA had forecast 3.3% for Q2 and in its August projections is expecting the WPI to trend lower to around 3% by Q2 2026. 2025 to date is showing some stabilisation in wage inflation.
• Cash US tsys are slightly mixed, with a flattening bias, in today’s Asia-Pac session.
• Cash ACGBs are flat to 2bps richer with a steeper 3/10 curve and the AU-US 10-year yield differential at -5bps.
• Expectations of sustained strong pricing at auctions proved accurate, with the latest round of ACGB Dec-35 supply seeing the weighted average yield print 0.22bp through prevailing mids. Moreover, today’s cover ratio rose to 3.2417x from 2.6500x.
• The bills strip is +1 to +3.
• RBA-dated OIS pricing is slightly softer across meetings today. A 25bp rate cut in September is given a 41% probability, with a cumulative 40bps of easing priced by year-end.

*JAPAN 5Y GOVT BOND AUCTION MAY HAVE 99.72 LOWEST PRICE:POLL – BLOOMBERG

The Japanese Ministry of Finance (MoF) will today sell Y2.4tn of 5-Year JGBs. MoF last sold 5-year debt on 8 July 2025.

• Yields on today’s offering are 5-10bps higher than last month’s issuance levels but remain 5-10bps below the cycle peak.
• The 2s/5s yield curve is 5bps steeper than last month and sits just below its cycle peak.
• Amid mixed to weak demand at recent auctions, today’s results will be closely watched for signs of continued softness.
• Results are due at 0435 BST / 1235 JST.