Some buying to match the index change may provide underlying support for bonds.
We may overshoot above 120, to 122. But I think that's about it. I think we're at the very, very high level of the range.
The Japanese economy is coming back to a path of subdued but steady expansion, fueled by demand at home. We expect the central bank will alter its policy by July at the latest.
Bonds will probably edge higher following a plunge in U.S. equities and gains in Treasuries. Bonds will take their cue from stocks.
Still, [Japan] will keep its low interest rate environment. And more and more money from individuals and (corporations) will flow into America and Europe -- mostly to North America.
Koizumi's victory triggered a rally in stocks and fueled optimism about an escape from deflation.
Yields will probably edge lower as a slowdown in the U.S. economy may fuel concern about Japanese exporters.
Five-year notes are a better bet as they have priced in a reduction of the money in the banking system. Long bonds have yet to fully price in the probability that the Bank of Japan will end the current easing policy.
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