Japan back to supply-demand

Now that the Greek problem has receded, the focus shifts back to fundamentals, monetary policy, and especially supply-demand. According to the JSDA (JSDA's Trading Activity by Investor Type for June), Trust banks were net purchasers of superlong-term JGBs again, and the amount of ¥338.2bn marked a big increase from May. 

Trust banks turned to net selling in September 2014 to conform to changes in the GPIF portfolio. The recent switch from selling back to purchasing suggests that JGB selling by the GPIF is dying down (GPIF portfolio got closer to target in 1Q15). 

Also, net purchasing of coupon-bearing JGBs by foreign investors recovered to ¥412.3bn in June, from ¥76.2bn in May. City banks were net purchasers of only ¥36.9bn of coupon-bearing JGBs in June, but it was the first net purchase in the year since June 2014. 

"Furthermore, the banks were conspicuously large purchasers of superlong-term JGBs. Aggressive JGB buyers cannot be found except the BOJ, but sellers seem to be fading at the same time, and then it is likely to be getting harder for the BOJ to maintain QQE", says RBC Capital Markets.