Bank of Uganda targets nearly Shs1 trillion in landmark treasury bond auction

The Bank of Uganda (BoU) has announced one of its largest-ever Treasury Bond auctions, seeking to raise nearly UGX 1 trillion across three maturities—an ambitious move that underscores the government’s reliance on domestic borrowing to fund public programs and stabilize its budget.

According to the central bank’s announcement, the auction—scheduled for Wednesday, October 29—will see the issuance of UGX 230 billion in 3-year bonds, UGX 330 billion in 10-year bonds, and UGX 430 billion in 20-year bonds, totaling UGX 990 billion.

The massive offer marks a major liquidity event for Uganda’s financial markets, effectively deepening the government securities market while allowing institutional investors to anchor their portfolios in long-term yields. Analysts say the size and diversity of the maturities signal the BoU’s confidence in Uganda’s macroeconomic fundamentals and its strategy to extend the average maturity of public debt.

“This capital injection is the engine room of government finance,” one senior market analyst said. “It helps maintain cash flow for public infrastructure, social services, and debt refinancing—while giving investors an opportunity to earn secure, inflation-beating returns.”

For investors, the auction represents not only a safe haven but also a rare high-yield opportunity in the regional market. The 10-year Treasury Bond (ISIN: UG12K0811352)—being reopened for additional issuance—offers a coupon rate of 16.25%, one of the most lucrative in East Africa.

Meanwhile, the 20-year bond, maturing in 2043, carries a 15.00% coupon, offering an appealing anchor for pension funds, insurance firms, and long-term asset managers seeking steady returns amid regional volatility.

BoU’s single-price auction system ensures transparency: all successful bidders receive allocations at the same price, set by the lowest accepted price (or highest accepted yield) among the competitive bids.

The most intense competition will occur among Uganda’s Primary Dealer Banks, the exclusive institutions authorized to submit competitive bids that determine the cut-off yield. The group includes Stanbic Bank, Standard Chartered Bank, Absa Bank, DFCU Bank, Equity Bank, Centenary Bank, Bank of Baroda, and Housing Finance Bank.

These banks effectively set the benchmark for the cost of government borrowing. Their bids reflect market expectations of inflation, fiscal performance, and monetary policy direction. Non-competitive bidders—including smaller institutions and individual investors—will receive allocations at the final weighted yield determined by the primary dealers.

“This auction will be a test of confidence,” said a treasury manager at one of the primary dealer banks. “It’s about how investors are pricing Uganda’s fiscal discipline and long-term stability in the face of global rate hikes and regional debt pressures.”

The BoU auction comes at a crucial moment for Uganda’s public finance management. As external financing conditions tighten and donor inflows moderate, the government has leaned increasingly on domestic debt markets to bridge budget deficits.

Uganda’s domestic debt stock has risen steadily, reaching over UGX 33 trillion by mid-2025—roughly 45% of total public debt, according to Ministry of Finance figures. However, officials maintain that the debt remains sustainable, with long-term bonds like these helping to spread repayment risks and lower refinancing pressures.

Economists note that sustained investor appetite for long-term securities reflects growing confidence in Uganda’s monetary policy stability and debt management framework. The Bank of Uganda has kept its policy rate at 9.5% since August to contain inflation while supporting private sector credit growth.

Beyond its technical details, Wednesday’s auction is being viewed as a barometer of investor sentiment toward Uganda’s fiscal trajectory and macroeconomic resilience.

If the auction is fully subscribed—as most analysts expect—it would reaffirm strong local market confidence and enhance Uganda’s ability to fund flagship projects under the Third National Development Plan (NDP III) and the upcoming NDP IV.

“This is more than a bond sale—it’s a statement of intent,” said Dr. Sarah Nannyonjo, a financial economist. “It shows that Uganda is deepening its domestic capital markets while giving investors a long-term stake in the country’s growth story.”

Auction Snapshot

• Auction Date: October 29, 2025
• Total Offer: UGX 990 billion
• Tenures: 3 years (UGX 230b), 10 years (UGX 330b), 20 years (UGX 430b)
• Coupon Rates: 3-year – market determined; 10-year – 16.25%; 20-year – 15.00%
• Auction Type: Multiple tenures, single price per instrument
• Eligible Bidders: Primary Dealer Banks and non-competitive applicants