BoU offers 16% yield on 25-year bond as over Shs800 billion rejected

The Bank of Uganda (BoU) has revealed results of its latest treasury bond auction for August 2025, showing a notable yield difference between long-term bonds as it rejected hundreds of billions in investor bids.

According to the central bank, the 25-year bond, issued for the first time with a maturity date of July 7, 2050, was offered at a cut-off yield of 16.00%, attracting significant investor interest. The auction saw Shs887 billion tendered, yet only Shs57.165 billion was accepted — indicating that BoU rejected over Shs829 billion, or over 93% of the submitted bids.

This high level of rejection suggests that the central bank was keen on controlling borrowing costs or was dissatisfied with the pricing of most investor offers.

Surprisingly, the 15-year bond, a re-opening from a previous issue (maturing June 23, 2039), saw a much higher cut-off yield of 17.650%, more than 1.5 percentage points above the 25-year instrument. This anomaly may reflect investors demanding a premium for perceived mid-term risk, or expectations of higher inflation in the medium term compared to the long-term horizon.

Out of the Shs700 billion tendered in the 15-year category, only Shs44.65 billion was accepted, meaning over Shs655 billion was turned away, again indicating strong investor appetite but selective acceptance by the central bank.

The 2-year and 5-year bonds also saw strong demand and lower yields. The 2-year bond maturing in January 2028 was priced at a cut-off yield of 15.750%, with a bid-to-cover ratio of 6.16. Out of Shs389.7 billion offered by investors, Shs63.251 billion was accepted.

The 5-year bond, maturing in August 2030, posted a 15.500% yield and attracted Shs318.8 billion in bids. BoU accepted just Shs9.036 billion, indicating a highly selective stance in this category as well — despite a striking bid-to-cover ratio of 35.2, the highest among the four maturities.

In total, BoU received nearly Shs2.3 trillion in bids across all tenors but accepted only a fraction — roughly Shs174 billion.

The aggressive rejection of bids despite the relatively high yields reflects BoU’s careful calibration of public debt costs and its broader monetary policy objectives.

The results come at a time when investors are closely watching the central bank’s signals on inflation, fiscal discipline, and domestic debt sustainability, especially in the face of increasing budgetary pressure and large infrastructure financing needs.