Japanese government bonds slipped in Tokyo's morning session, mirroring overnight weakness in U.S. Treasurys as both markets tend to move in lockstep. The 10-year JGB yield climbed 2 basis points to 2.540%, reaching its highest intraday level since June 1997, according to data provider Quick.

Investors face a key test as Japan's Finance Ministry prepares to auction about 2.6 trillion yen of 10-year sovereign securities on Tuesday. Citi Research's Tomohisa Fujiki expects pension funds to rebalance portfolios amid rising stock prices, though he warns that yen strengthening from FX interventions could reduce demand for yen bonds on the margin.

The yield now sits at 2.540%, a level unseen since June 1997, leaving traders to judge whether the ministry's 2.6 trillion yen supply will meet investor appetite or push borrowing costs higher still.