Core Viewpoint - The surge in Japan's ultra-long government bond yields reflects a structural lack of demand from the private sector [1] Group 1: Yield Surge Reasons - The increase in yields is attributed to structural demand deficiencies in the Japanese private sector [1] - Position adjustments and concerns regarding long-term fiscal policies may also contribute to the rise in yields [1] - Ultra-long bonds are unlikely to stabilize until structural supply and demand improvements occur [1] Group 2: Central Bank Focus - In the absence of sufficient demand from private investors, the Bank of Japan's potential adjustments to quantitative tightening policies and government bond issuance may become a focal point [1]

Core Viewpoint - Japan's 20-year government bond auction has experienced its worst performance since 2012, with a bid-to-cover ratio dropping to 2.5 times, significantly lower than the previous month's 2.96 times [1] Group 1: Auction Performance - The tail difference surged from 0.34 in April to 1.14, marking the highest level since 1987 [1] - The yield on Japan's 20-year bonds rose by approximately 15 basis points, reaching the highest level since 2000 [1] - The yield on 30-year bonds has also climbed to the highest level since their first issuance in 1999 [1] - The yield on 40-year bonds has reached a record high [1] Group 2: Market Reactions - Short-term Japanese bond yields have seen a slight decline amidst the volatility in the bond market [1] - The Bank of Japan faces a dilemma regarding the continuation of its quantitative tightening policy, as further tightening could lead to increased yields and significant paper losses for bondholders [1] - Conversely, abandoning quantitative tightening could risk uncontrolled inflation and a collapse of the yen [1]