South Korean government bonds could strengthen if the Bank of Korea slows the pace of interest-rate increases rather than tightening as much as markets expect, M&G said, even after the central bank resumed hiking in July and officials signaled further moves remain likely. Low Guan Yi, M&G’s head of Asia fixed income in Singapore, said the Korean bond yield curve has priced in too many rate hikes and argued that a semiconductor-driven tax windfall from chipmakers and hardware suppliers should reduce Seoul’s need to issue debt, tightening supply. M&G, a London-based asset manager overseeing more than £300 billion, has added to its Korean government bond holdings over the past two months on that view. The Bank of Korea raised its benchmark rate by a quarter point to 2.75% in July, its first increase since early 2023, after second-quarter growth of 0.6% and July consumer inflation of 2.8% came in above target. Outgoing senior deputy governor Ryoo Sangdai said further hikes remain likely ahead of the Aug. 27 policy meeting and that inflation trends will matter more than recent won stabilization or a pullback in the KOSPI. Foreign investors were net sellers of about $1.2 billion of Korean government bonds in July, the biggest outflow since February 2025, while the 10-year yield has risen 22 basis points since the end of June. M&G’s call will be tested by the Aug. 27 decision: a slower pace of tightening could support a rebound in Korean Treasury Bond prices, while another consecutive increase would back the hawkish pricing already reflected in swap markets.