Japanese government bonds look set for further gains with both foreign and domestic investors seen returning to a market where the central bank has often been the only buyer this year.

A pullback in bets on a Bank of Japan policy tweak resulted in record monthly purchases from overseas funds in July, while soaring hedging costs have wiped out the traditional yield premium Japanese investors enjoyed from markets like Treasurys, leading to expectations of a switch back to JGBs from local buyers such as life insurers.

The return of real demand would be a world away from the pressure the bond market came under in June when only unprecedented BOJ buying kept benchmark yields below the central bank’s 0.25% target ceiling. Those yields have since fallen to as low as 0.16% this month as other buyers resurfaced, helped by a global bond rally on fears of a slowing world economy.