The cut in the debt sales is a positive for bonds. The improved fiscal situation with a stricter cap on sales lightens up the sentiment in the market.

Yields could go above 2 percent in the short-term. People are focusing on the U.S. because they think it's driving the global economy's recent robust pace of growth.

The auction showcased disappointing demand. Rallying stocks are building sentiment that Japan's economy will sustain a reasonably good pace of growth, signaling higher yields.