Certain email servers, Yahoo especially, throttle deliveries when multiple inbound is detected from the same IP. When this happens, Mailgun sends a "temporary" severity bounce. Mailgun will continue to retry over a period of time. If it can't deliver after 8 hours. The email will permanently fail with severity: permanent and reason: old.

Just to add that there is also reason: old. This happens when email cannot be delivered after 8 hours. It should still be treated as a non permanent bounce though.

I did some further digging and found that there is a reason property that can be used to determine whether Mailgun added an email address to its bounce suppression list:

...but even repeated soft bounces is a message level event, not one that means there will never be an opportunity to deliver to this address again. Hence Mailgun itself not adding this to their permanent uppression list..but that implies, right, that they will send to the permanent failure hook in this case?

From that quote above, it is clear Mailgun recognise this issue themselves (the possibility of one-off soft bounces for a variety of reasons) and therefore do not add these contacts to their permanent bounce list - unless its a true hard bounce. But they are rightly still alerting that the message in question has permanently failed to be delivered on this occasion.

Mailgun, with its permanent failure webhook, is sending a message about a permanent failure of that specific message - it is Campaign that is then making a decision to translate this message, about just that one message, into a permanently bounced (suppressed) contact, and blocking all future emails to that contact - based on, what is clearly quite possibly just a temporary failure. It's really the distinction between a single message level (temporary) problem and a (permanent) contact level problem that is being lost with Campaign's current approach.

but that before marking the contact as a bounced, Campaign should double check it was really a hard bounce that would affect future deliverability.

some are legit bounces (people who typed emails wrongly etc) - but some are 'too old' which is a generic deliverability type message (according to Mailgun)

This becomes, then, a thorny problem - these perfectly valid emails, that are affected by this temporary issue - are marked as permanently bounced in Campaign...when they really shouldn't be given this bigger picture.

But these are not permanent failures - they ARE permanent for that message of course

his is not wonderfully clear/great form Mailgun's end (as they are effectively translating a temporary delivery issues into a message about a permanent contact failure) - but the net effect is pretty broken handling of temporary bounces against contacts, which just creates inaccuracies and a bit of a mess.