The market is speculating that the Government Pension Investment Fund of Japan (GPIF) may increase its allocation to domestic bonds from 25% to 35%, while reducing its allocation to overseas bonds and overseas stocks to 20% each. Citigroup's global macro strategy team believes that if the adjustment is confirmed, the yen and Japanese long-term bonds may be the first to reflect expectations of capital inflows; US Treasuries account for about 50% of GPIF's overseas sovereign bond holdings, and therefore will also face potential selling pressure.
