Seasonality Supports Our Trades

Research evidence excerpt

Seasonality Supports Our Trades

Idea

July 21, 2026 11:49 AM GMT

Morgan Stanley MUFG Securities Co., Ltd.+MJapan Rates Strategy | Japan Koichi Sugisaki

Strategist

Seasonality Supports Our Koichi.Sugisaki@morganstanleymufg.comHiromu Uezato +81 3 6836-8428

Hiromu.Uezato@morganstanleymufg.com +81 3 6836-8431

Trades

Overseas investors remain reluctant to chase super-long JGB

rallies amid uncertainty over GPIF repatriation and fiscal

expansion. We stay constructive on the belly, where inflation risk

looks overstated, but bearish on the super-long end with

remaining fiscal concern. Seasonality also supports

Key Takeaways

Fiscal uncertainty and doubts over GPIF repatriation limit offshore demand for

super-long JGBs, despite occasional strong auctions.

Offshore investors drive 50–60% of super-long secondary trading, leaving the

sector vulnerable when domestic pension demand fades.

Cooling food inflation and limited cost pass-through support belly longs; softer

loan demand could revive bank demand for 10y JGBs.

We estimate seasonal patterns in the JPY rates market heading into the summer

lull. The super-long sector tends to come under pressure from July onward

Meanwhile, the 5y sector appears well positioned to benefit from a summer rally,

supported by the ongoing unwinding of the excessive inflation risk premium.

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