Bonds will find it hard to rise today. The fundamental trend that the economy is recovering has not changed.

Support from a lack of new supply will be short-lived.

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 report will probably prompt investors to imagine the era of low rates is going change soon.

Investors may start worrying that the central bank will scale back its monthly bond purchases to reduce the amount of money in the system. That will push up yields further.

The decline in stocks yesterday was not the start of a trend. At this level investors should sell bonds.

We're unlikely to see a rally in medium-term bonds with core consumer prices edging up.

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.