Uganda government raises Shs1.3 trillion from Treasury bond auction

The government of Uganda on Wednesday, August 7, 2024, raised UGX 1.3 trillion from the sale of Treasury bonds.

Through the 10-year bond, the government raised about UGX450 billion, the 19-year-old bond raked in Shs650 billion while the two-year bond brought Shs289 billion.

This is contained in a statement issued by Bank of Uganda on Wednesday.

The government of Uganda auctions treasury bonds to finance the national budget.

Alex Kakande, a financial analyst, said the government has made a good rebound in interest rates across the long term treasury bonds.

“On average, rates have increased by 50 basis points from the lows experienced in July 2024. The auction was dominated by the 19-year Treasury bond, which achieved a cut-off rate of 16.5% and garnered UGX 650 billion,” he wrote on his X page.

“This outcome stands in stark contrast to the July 2024 Treasury bond sale, during which the Treasury accepted bids that were lower than the amount offered, leaving substantial cash unutilized. This led to a significant drop in interest rates within the fixed income market throughout July,” he added.

According to Kakande, in the August auction, the Treasury accepted UGX 400 billion more than it had initially offered, “despite the market presenting over UGX 2 trillion in tenders for this auction—nearly double the amount tendered.”

He said the yields have been influenced by the abundance of liquidity in the market, vying for the same fixed income products.

“These current rates emerge at a time when the Monetary Policy Committee of the Bank of Uganda has just reduced the Central Bank Rate (CBR) by 25 basis points. This move is likely to continue steering market interest rates, affecting both investment and borrowing, towards a downward trend,” he added.