The Bureau of the Treasury (BTr) upsized its Treasury bills (T-bills) award on Monday to P28.4 billion from P25 billion as interest rates fell across the board, which an economist said signals possible policy rate cuts by the Bangko Sentral ng Pilipinas.

BTr auctioned 91-day, 182-day and 364-day T-bills which attracted total bids amounting to P102.9 billion or 4.1 times bigger than the initial total offer of P25 billion.

BTr made a full award of the three-month debt papers worth P7 billion as their average rate declined to 5.475 percent from the 5.526 percent recorded during the auction last 7 July.

The Treasury, however, raised its award for the six-month papers to P11.9 from P8.5 billion as their average rate settled at 5.575 percent, lower than the 5.618 percent in the previous auction.

Lastly, BTr made a full award of the one-papers worth P9.5 billion as their average rate declined to 5.650 percent from 5.656 percent in the last week's auction.

Investors’s anticipation of low inflation risks

Rizal Commercial Banking Corporation chief economist Michael Ricafort said the lower T-bills' rates reflected investors' anticipation of low inflation risks, which could lead to further reduction of the policy rate by the Central Bank. Currently, it imposes 5.25 percent.

Ricafort said the local central bank might follow projected monetary policy easing of the US Federal Reserve as a way to sustain economic growth amid trade tensions arising from Trump tariffs.

"Trade wars could slow down the global economy and could support future Federal Reserve's cuts of 50 basis points for the rest of 2025," he said.

Ricafort added that inflationary risks might soften as government and business leaders expect US President Donald Trump to reduce tariffs under his TACO strategy.

TACO

"TACO means Trump Always Chickens Out, wherein Trump usually threatens at the start with much higher tariffs as a negotiating tactic for compromises toward a much lower tariff rate," the economist said.

Trump raised the tariff rate on the Philippines to 20 percent from 17 percent, but announced to start implementing it on 1 August.

HSBC economist for Southeast Asia Aris Dacanay said government leaders might adopt Vietnam's free market access for US goods and companies, which led to a lower tariff of 20 percent from 46 percent for the Southeast Asian country.