JAPAN DATA: Wages Weaker Than Forecast, Weighed By Bonus Payment Slump
Japan May labor cash earnings were weaker than forecast. Headline nominal cash earnings rose 1.0%y/y, versus a 2.4% forecast. The prior April outcome was also revised down to a 2.0% rise (initially reported as a 2.3 % gain). In real terms, earnings were down -2.9%y/y, against a -1.7% forecast and prior -2.0% outcome. For nominal earnings this is weakest outcome since Mar 2024, while in real terms it is back to Sep 2023 lows. See the top panel of the chart below. It also widens the trend with last Friday's stronger real household spending outcome.
- A slump in bonus payments, down -18.7%y/y, weighed on the headline results. Contracted and scheduled pay in y/y terms were little changed versus April levels. Bonus payments tend to be quite volatile (we were at +74.1%y/y in Feb), so there is scope for this to be less of a headwind in months ahead.
- On a same sample base, cash earnings were +2.3%y/y, below the 2.8% forecast and 2.6% prior outcome. Scheduled full time pay (on a same base) rose 2.4%y/y, also below market expectations (2.6% was the forecast and 2.5% printed in April). See the bottom panel of the chart below. These trends are more positive compared to the headline earning outcomes, but sit off 2024 highs.
- In this segment, special payments also fell 3.6%y/y, versus a +2% gain in April. Again, there is scope for this to be less of a headwind going forward.
- All in all, given the contribution of bonus payments to the headline fall it softens the negative message from today's print. The BoJ still have time on its hands to assess wages trends, with the near term bias likely to see rates left on hold.
Fig 1: Japan Labor Earnings Slowed In May, As Bonus Payments Fell
Source: Bloomberg Finance L.P/MNI
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JGB TECHS: (M5) Rallies Off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.19 @ 15:53 GMT Jun 06
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: June 2025
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- May’s refunding round saw guidance as well as coupon sizes for the current quarter unchanged.
- The August round (Jul 28-30) could prove more compelling, reflecting both pressure at the long end of the Treasury curve as well as a shifting fiscal outlook amid tariff revenues contrasted with impending tax cuts (not to mention the likelihood of approaching the debt limit at around that time if it’s not lifted).
- Future Coupon Upsizing: We’ve seen some expectations that Treasury could lean against some of those trends in the August refunding, with potential signals if not immediate action on adjusting buybacks or even reducing issuance duration in order to reduce pressure on the long end. MNI’s current expectation is that coupon sizes will only be increased in early 2026. We will update in our next Deep Dive at end-June, with our full refunding preview coming in late July.
- Upcoming issuance: June is set to see $315B in nominal Treasury coupon sales, in addition to $23B in 10Y TIPS and $28B FRN for a total of $366B. Sales for the month start in the coming week, on Tuesday June 10 with $58B of 3Y Note, Wednesday June 11 with $39B of 10Y Note, and Thursday June 12 with $22B of 30Y Bond.
- May Auction Results: Against a backdrop of continued steepening pressure for global sovereign curves, May’s coupon auctions saw strong sales at the short-end/belly contrasted with tails at the long-end.
US FISCAL: Extraordinary Treasury Measures Tick Up As Cash Depletes
Treasury had $84B in "extraordinary measures" available to keep the government financed as of June 4 per a release Friday. That is up from $68B a week earlier though Treasury has exhausted three-quarters of the total initially available ($362B) when the debt limit impasse began in January.
- Combined with a pullback in Treasury cash ($376B), the total resources available to avert an "x-date" in the summer are down to a total $460B, the lowest since April 10 before the annual tax take accelerated.
- There will be another uptick in Treasury cash late next week/early the following week around the mid-June tax date, but this is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
