We're unlikely to see a rally in medium-term bonds with core consumer prices edging up.
Bonds will find it hard to rise today. The fundamental trend that the economy is recovering has not changed.
Bonds will extend declines. There is no change in the fact that rates are headed higher in Japan, the U.S. and Europe.
The upside for bonds will be heavy. Unless there is a sudden slowdown in overseas economies, Japan's economy will probably extend its recovery.
Investors cannot justify buying bonds and they want to avoid 10-year yields going lower than 1.3 percent. There is a five-year note auction next week and investors don't want to have a low coupon on it.
The chances of 10-year yields soaring above 1.6 percent are high. Ten- year bonds look expensive compared with five-years and so it could take some time for dealers to sell all the bonds onto investors.