Short-term debt draws strong demand in Uganda’s October treasury bills sale

Investor appetite for short-term government securities surged in the latest Treasury Bills (T-Bills) auction conducted by the Bank of Uganda (BoU) on Wednesday, October 22, 2025, reflecting strong confidence in low-risk assets amid a persistently high interest rate environment.

The bi-weekly auction (No. 1216) attracted robust bidding across all maturities—91-day, 182-day, and 364-day T-Bills—underscoring sustained investor demand for government-backed paper. T-Bills are short-term debt instruments through which the Government of Uganda borrows from the public and financial institutions for periods of three, six, or twelve months, and are widely considered one of the safest investment options in the market.

91-Day Paper Oversubscribed Fivefold

The 91-day paper drew the most aggressive investor interest, posting a bid-to-cover ratio of 5.05, a strong signal of market enthusiasm. The government had offered UGX 25 billion, but bids totaled UGX 44.2968 billion, indicating that investors tendered more than five times the amount on offer. However, BoU accepted only UGX 8.7718 billion to manage liquidity and borrowing costs, with the money market yield settling at 11.495%.

Analysts say the high oversubscription reflects excess liquidity in the banking system and a preference among institutional investors for short-duration, risk-free instruments in a period of economic uncertainty. “This level of demand for the 91-day paper signals cautious positioning by banks and fund managers who are prioritizing safety and flexibility,” one market observer noted.

Stable Demand Across Longer Tenors

The six-month and one-year maturities also saw solid performance, maintaining competitive yields that continue to attract investors seeking higher returns than traditional savings instruments.

The 182-day T-Bills recorded a bid-to-cover ratio of 2.869, with total bids of UGX 97.8655 billion against an offer of UGX 75 billion. BoU accepted UGX 34.1105 billion at a yield of 13.071%.

Meanwhile, the 364-day paper, typically offering the highest return on the curve, attracted the largest nominal bids—UGX 565.0266 billion against an offer of UGX 255 billion—resulting in a bid-to-cover ratio of 1.341. The accepted amount stood at UGX 421.2766 billion, with the money market yield at 14.946% and an effective yield of 14.949%.

Market Signals and Economic Implications

The continued strength in T-Bill demand gives the government room to finance its short-term budget needs while providing the central bank with flexibility to manage domestic liquidity. The relatively high yields, ranging from 11.5% to nearly 15%, mirror the prevailing tight monetary stance aimed at curbing inflation and stabilizing the Ugandan shilling.

“The auction results confirm that investors remain confident in Uganda’s fiscal credibility and that the government securities market remains a preferred destination for short-term capital,” said an economist familiar with BoU’s operations.

The settlement for all successful bids is Thursday, October 23, 2025.

As investors continue to favor short-term government paper, analysts expect yields to remain elevated in the near term, particularly as the BoU maintains its cautious approach to inflation management and liquidity control.