Asia’s worst bonds are turning a corner

SEOUL (June 2): South Korea’s economy is getting uglier, and that looks like good news for Asia’s worst-performing bond market over the last three months.

Bonds rallied Wednesday in Seoul after reports showed exports contracted for a 17th straight month in May, contributing to the smallest current-account surplus since June 2014, and consumer prices were flat from April. While policy makers left the benchmark interest rate at a record-low 1.5% last month, minutes of the Bank of Korea’s May 13 decision showed that one board member called for a rate cut “in near term.”

Speculation is intensifying that the BOK will cut interest rates next month as Asia’s fourth-largest economy deals with slowing growth and massive restructuring in the shipping and shipbuilding industries. While most economists predict the central bank will stand pat at its June 9 meeting, Mirae Asset Global Investments Co. expects calls for a reduction by more board members to presage a move in July.

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