Some people were concerned that with yields below 2 percent there might not be enough demand for the bonds. However, the auction went okay and that spurred buying of futures.
Fukui's comments were just very hawkish overall. There's certainly room for short-term yields to rise and the yield curve to flatten more as the market factors all this in.
Investors aren't sure if they should buy more longer-dated bonds with yields this low.
Government debt sold off too much. Yields are high enough to lure investors. Yields already reflect speculation that a rate increase may come in the fourth quarter of 2006.