diff --git a/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java b/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
index d53bb2e26820..48a41cbafc8f 100644
--- a/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
+++ b/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
@@ -167,8 +167,9 @@ public class PsiSubstitutorImpl implements PsiSubstitutor {
               return newBound;
             }
           }
-          if (!wildcard.isBounded()) return PsiWildcardType.createUnbounded(wildcardType.getManager());
-          return newBound;
+          if (wildcard.isBounded()) {
+            return newBound;
+          }
         }
 
         return newBound == PsiType.NULL ? newBound : rebound(wildcardType, newBound);
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/IDEA125423.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/IDEA125423.java
index 868b4dffd7ac..f2fd3d22350f 100644
--- a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/IDEA125423.java
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/IDEA125423.java
@@ -13,7 +13,7 @@ class Test {
 
 class FooBar<T> {
   void foo(final FooBar<?> fooBar){
-    //fooBar.supertype(Iterable.class);
+    fooBar.supertype<error descr="'supertype(java.lang.Class<? super capture<?>>)' in 'FooBar' cannot be applied to '(java.lang.Class<java.lang.Iterable>)'">(Iterable.class)</error>;
   }
 
   void foo1(final FooBar<? super T> fooBar){
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SubstitutorCaptureBoundComposition.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SubstitutorCaptureBoundComposition.java
new file mode 100644
index 000000000000..8cfa716454b9
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SubstitutorCaptureBoundComposition.java
@@ -0,0 +1,64 @@
+
+interface NodeTraverser<T> {
+  NodeTraverser<T> filter(Predicate<? super T> filter);
+
+  NodeTraverser<T> filter1(Predicate<T> filter);
+
+  NodeTraverser<T> filter2(Predicate<? extends T> filter);
+}
+
+interface Predicate<P> {
+}
+
+class Test {
+
+  void foo(NodeTraverser<?> traverser,
+           NodeTraverser<? extends String> traverser1,
+           NodeTraverser<? super String> traverser2,
+
+           Predicate<?> filter,
+           Predicate<? extends String> filter1,
+           Predicate<? super String> filter2) {
+
+    traverser.filter<error descr="'filter(Predicate<? super capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>;
+    traverser.filter1<error descr="'filter1(Predicate<capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>;
+    traverser.filter2<error descr="'filter2(Predicate<capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>; //"'filter2(Predicate<? extends capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'"
+
+    traverser1.filter<error descr="'filter(Predicate<? super capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>;
+    traverser1.filter1<error descr="'filter1(Predicate<capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>;
+    traverser1.filter2<error descr="'filter2(Predicate<capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>; // "'filter2(Predicate<? extends capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'"
+
+    traverser2.filter<error descr="'filter(Predicate<capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>; // "'filter(Predicate<? super capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'"
+    traverser2.filter1<error descr="'filter1(Predicate<capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>;
+    traverser2.filter2<error descr="'filter2(Predicate<? extends capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<?>>)'">(filter)</error>;
+
+
+
+    traverser.filter<error descr="'filter(Predicate<? super capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'">(filter1)</error>;
+    traverser.filter1<error descr="'filter1(Predicate<capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'">(filter1)</error>;
+    traverser.filter2<error descr="'filter2(Predicate<capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'">(filter1)</error>;// "'filter2(Predicate<? extends capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'"
+
+    traverser1.filter<error descr="'filter(Predicate<? super capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'">(filter1)</error>;
+    traverser1.filter1<error descr="'filter1(Predicate<capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'">(filter1)</error>;
+    traverser1.<error descr="Cannot resolve symbol 'filter2'">filter2</error>>(filter1);// "'filter2(Predicate<? extends capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'"
+
+    traverser2.filter<error descr="'filter(Predicate<capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'">(filter1)</error>;//  "'filter(Predicate<? super capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'"
+    traverser2.filter1<error descr="'filter1(Predicate<capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? extends java.lang.String>>)'">(filter1)</error>;
+    traverser2.filter2(filter1);
+
+
+
+    traverser.filter<error descr="'filter(Predicate<? super capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;
+    traverser.filter1<error descr="'filter1(Predicate<capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;
+    traverser.filter2<error descr="'filter2(Predicate<capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;//  "'filter2(Predicate<? extends capture<?>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'"
+
+    traverser1.filter(filter2);
+    traverser1.filter1<error descr="'filter1(Predicate<capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;
+    traverser1.filter2<error descr="'filter2(Predicate<capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;// "'filter2(Predicate<? extends capture<? extends java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'"
+
+    traverser2.filter<error descr="'filter(Predicate<capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;// "'filter(Predicate<? super capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'"
+    traverser2.filter1<error descr="'filter1(Predicate<capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;
+    traverser2.filter2<error descr="'filter2(Predicate<? extends capture<? super java.lang.String>>)' in 'NodeTraverser' cannot be applied to '(Predicate<capture<? super java.lang.String>>)'">(filter2)</error>;
+  }
+
+}
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/UncheckedCasts.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/UncheckedCasts.java
index 0532d1f1f6ce..3506396c6c03 100644
--- a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/UncheckedCasts.java
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/UncheckedCasts.java
@@ -45,7 +45,7 @@ class AllPredicate<T>
     }
 
     public static void foo(SortedMap<?, ?> sourceSortedMap) {
-        new TreeMap<Object, Object>(<warning descr="Unchecked cast: 'java.util.Comparator<capture<?>>' to 'java.util.Comparator<? super java.lang.Object>'">(Comparator<? super Object>) sourceSortedMap.comparator()</warning>);
+        new TreeMap<Object, Object>(<warning descr="Unchecked cast: 'java.util.Comparator<capture<? super capture<?>>>' to 'java.util.Comparator<? super java.lang.Object>'">(Comparator<? super Object>) sourceSortedMap.comparator()</warning>);
     }
 }
 
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/UncheckedCasts.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/UncheckedCasts.java
index 0532d1f1f6ce..3506396c6c03 100644
--- a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/UncheckedCasts.java
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/UncheckedCasts.java
@@ -45,7 +45,7 @@ class AllPredicate<T>
     }
 
     public static void foo(SortedMap<?, ?> sourceSortedMap) {
-        new TreeMap<Object, Object>(<warning descr="Unchecked cast: 'java.util.Comparator<capture<?>>' to 'java.util.Comparator<? super java.lang.Object>'">(Comparator<? super Object>) sourceSortedMap.comparator()</warning>);
+        new TreeMap<Object, Object>(<warning descr="Unchecked cast: 'java.util.Comparator<capture<? super capture<?>>>' to 'java.util.Comparator<? super java.lang.Object>'">(Comparator<? super Object>) sourceSortedMap.comparator()</warning>);
     }
 }
 
diff --git a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
index eebb36e0ed09..e1a4bcd5cb99 100644
--- a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
+++ b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
@@ -386,6 +386,10 @@ public class GenericsHighlightingTest extends LightDaemonAnalyzerTestCase {
   //jdk should propagate LL 1.4 but actually it provides LL 1.7?!
   public void testCastObjectToIntJdk14() { doTest(LanguageLevel.JDK_1_7, JavaSdkVersion.JDK_1_4, false); }
 
+  public void testSubstitutorCaptureBoundComposition() {
+    doTest(LanguageLevel.JDK_1_7, JavaSdkVersion.JDK_1_7, false);
+  }
+
   public void testIDEA127767() {
     doTest(LanguageLevel.JDK_1_7, JavaSdkVersion.JDK_1_7, false);
   }