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

The upside for bonds will be heavy. Unless there is a sudden slowdown in overseas economies, Japan's economy will probably extend its recovery.

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

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

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.

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