Yields will rise as the market prices in a policy change.

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.

That's likely where yields will be headed toward April.

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.

The trend is for higher yields given the outlook for economic growth. Consumer prices will probably turn positive after October.