JGBS: Twist-Steepener, US Tsys Richer Ahead Of US Payrolls

BoJ-dated OIS pricing is slightly firmer following the release of December cash earnings data.

• Japan’s December labor earnings data exceeded expectations. Headline nominal earnings rose 4.8% year-on-year, outperforming the 3.7% forecast and a revised 3.9% gain in November. Real earnings increased by 0.6% year-on-year, compared to a forecast of -0.1%, following a revised 0.5% rise in November. Cash earnings on a same-sample basis surged 5.2% year-on-year, well above the 3.6% forecast and 3.7% prior reading. Scheduled full-time pay rose 2.8% year-on-year, matching forecasts and slightly up from 2.7% previously.
• OIS pricing remains flat to 4bps softer across meetings through September compared to pre-MPM levels. However, both the October and December meetings now show firmer pricing relative to pre-MPM levels, reflecting the impact of today’s data.
• Market expectations prior to the January 23–24 MPM indicated a 98% probability of a 25bp hike, a cumulative 99% chance by March, and more than a full 25bp increase (108%) priced in by May 2025.
• Currently, the probability of another 25bp hike in March stands at 0%, with a full 25bp increase not priced in until December.

Figure 1: BoJ-Dated OIS – Today Vs. Pre-BoJ MPM (January)

Source: MNI – Market News / Bloomberg

• The PBOC issued CNY697bn of 7-day reverse repo at 1.5% in this morning’s operations.
• Today’s maturities CNY1413.5bn of 14-day reverse repo and CNY.
• Net liquidity withdrawal CNY716.5bn.
• The PBOC controls and maintains liquidity through the issuance of 7-day reverse repo.
• Leading into the Lunar New Year holiday, the PBOC issued 14-day reverse repo to meeting the maturity requirements created by the holiday.
• The CFETS pledged repo institutions 7-day index value printed today at 1.75%.
• China’s overnight repo rates increased to 1.7712%, and the 7-day repo rate declined to 1.8041%

• CHINA PBOC CONDUCTS CNY697 BLN VIA 7-DAY REVERSE REPO WEDS