Bonds may find it difficult to rise as stocks are looking strong toward the year-end. Japan may have stable growth next year, leading to higher yields.

Bonds will probably stay lower as traders may prepare for the auction. Bonds also will be capped by gains in stocks, along with rising U.S. Treasuries yields.

Purchases by the public pension fund will become a stabilizer for the market. The fund will be a steady buyer of government debt with five-year and longer maturity, helping limit a rise in yields this year.

The pension fund will probably invest most of its allocation in domestic debt because Japanese stocks have had a good rally over the past year and the value of bonds is low. Some money may be used to buy overseas bonds.

Month-end demand is gone now that we're in a new month and what we're seeing is unwinding of recent flattening positions.

The faster decline in the GDP deflator could prompt government calls to forestall an early end to quantitative easing, but the data reflects balanced growth in the economy.