Overview:
Our focus is on the new 15-year treasury bond maturing in 2039, which was introduced to the Market at Par of 15.8% in the July 2024 Auction a rate market monitors felt was lower than anticipated
The Bank of Uganda has announced the call for bid applications for next month’s treasury bond auction. The upcoming bid notification includes three bonds: the 2-year bond with CUSIP UG12G0907265, the 5-year bond with CUSIP UG0000001533, and the newly launched 15.8% coupon rated 15-year Treasury Bond with CUSIP UG12K2306393.
In contrast, in previous years, the Bank of Uganda primarily auctioned two tenors of treasury bonds: one for the medium term (2, 3, and 5-year bonds) and one for the long term (10, 15, 20-year bonds). In the next month’s auction, they will continue to offer three tenor treasury bonds: two for the medium term (2 and 5-year treasury bonds) and one for the long term (15-year bond). (The 5 year bond has a 10% withholding tax, for those who want to invest in medium term but still pay lower taxes).
In this round, with three bonds, the Bank of Uganda is looking to raise approximately UGX 990 billion or close to one trillion UGX at the back of raising over UGX 1 trillion in the previous month. This continues to raise the question: Is this the new trend where the Government of Uganda aims to raise nearly 1 trillion UGX from the primary market in almost every auction? if 1 trillion UGX becomes the norm, this becomes a significant amount of money that the government will attempt to raise each month from domestic bond auctions.
Our focus is on the new 15-year treasury bond maturing in 2039, which was introduced to the Market at Par of 15.8% in the July 2024 Auction a rate market monitors felt was lower than anticipated, and which leaves a question as we go to the September Auction, will we see it getting discounted, will the 15 year bond rates cross back to the 16% range or is it going to remain a somewhat expensive bond to buy from the primary market. for those planning to invest, it is crucial to fill out the correct CSD forms (CSD Form 2) to ensure that the banks submit your bids in time for next Month’s auction.
Happy Investing everyone
Alex Kakande is a financial analyst