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[Japanese Government Bonds Show Divergent Trends, Ultra-Long-Term Bonds Under Pressure] ⑴ On Monday, Japanese government bond futures lacked a clear direction. The relative resilience of the 10-year bond was a bright spot, while less active ultra-long-term bonds faced significant selling pressure. ⑵ Futures opened 8 points higher than Friday at 126.82, briefly rising to 126.83 before falling back. The 10-year bond received immediate buying support, with the benchmark yield falling by 1 basis point to around 2.76%, maintaining its relative strength until the close. ⑶ Subsequently, selling pressure on 20-year and 30-year government bonds put pressure on futures. At midday, yields on both maturities rose by approximately 1.5 basis points, to around 3.625% and 3.85%, respectively. (4) In the afternoon, 25-year low-coupon, inactive bonds suddenly experienced a concentrated sell-off, with futures prices falling to a daily low of 126.49. Yields on two 0.7% coupon bonds maturing in 2051 jumped 7 and 8 basis points respectively, and the 10-year yield subsequently rebounded to around 2.785%. (5) The weakness in ultra-long-term bonds may be related to media reports that Japan is considering nearly doubling its defense spending over the next five years. The report stated that if approved, defense spending over five years starting in April 2027 would be set at 70 trillion to 80 trillion yen, approximately 1.8 times the current five-year plan of about 43 trillion yen. (6) However, the 10-year bond subsequently regained support, recovering its previous losses by around 2:20 PM, surprising some participants who had expected the 10-year yield to rise to 2.80% to attract demand for this week's 10-year government bond auction. (7) 20- to 30-year maturities were weak until the close. Investor activity in the spot bond market exceeded some participants' expectations. Regional banks showed strong buying interest in 2-year government bonds, and additional onshore buying also occurred in medium-term maturities. (8) Quotes at 3 PM showed that the 10-year futures contract fell 0.03 to 126.71, the 20-year futures contract fell 0.19 to 90.97, the 2-year yield rose 0.5 basis points to 1.880%, the 10-year yield remained unchanged at 2.770%, the 20-year yield rose 2.0 basis points to 3.630%, and the 30-year yield rose 3.5 basis points to 3.870%. (9) In the swap market, the overnight index swap rate for the 10-year yen fell 0.125 basis points to 2.67625%, the 20-year rate rose 0.625 basis points to 3.26875%, and the 30-year rate rose 1.250 basis points to 3.44375%. The overnight index swap rate for the Bank of Japan's December meeting showed that the market priced in an 80.0% probability of a 25 basis point rate hike, unchanged from last Friday. (10) The Nikkei index fell 208.25 points, or 0.33%, to close at 63081.86. The USD/JPY exchange rate was 157.81. Attention will be focused on Tuesday's 10-year government bond auction and the Bank of Japan's policy meeting minutes.