German and Italian experience suggests a sustained, significant drop in ultra-long JGB yields is unlikely. If market concern that the BOJ is behind the curve abates, 30-year JGB yields may fall, but such declines are likely temporary. Fiscal worries that widen JGB ASW spreads can push ultra-long yields back up. Even with stable inflation expectations and ASW, uncertainty over the terminal BOJ policy rate can prevent a sustained downtrend—European 30-year yields rose until ECB rates topped out. N

German and Italian experience suggests a sustained, significant drop in ultra-long JGB yields is unlikely. If market concern that the BOJ is behind the curve abates, 30-year JGB yields may fall, but such declines are likely temporary. Fiscal worries that widen JGB ASW spreads can push ultra-long yields back up. Even with stable inflation expectations and ASW, uncertainty over the terminal BOJ policy rate can prevent a sustained downtrend—European 30-year yields rose until ECB rates topped out. Near term, easing BOJ-behind-the-curve fears could shave yields briefly, but year-end debate on the next fiscal-year budget and relatively rich JGB ASW versus peers argue against a durable, trend decline in ultra-long JGB yields.