BoU treasury bill auction attracts heavy bidding, higher rates

KAMPALA — Investor appetite for short-term government securities remained robust this week, with the latest Bank of Uganda Treasury Bills auction attracting heavy bidding across all maturities, signaling sustained market confidence in government paper amid tight liquidity conditions.

According to auction results released by the Bank of Uganda for Auction No. 1217 held on November 5, 2025, the central bank offered UGX 25 billion in Treasury Bills but received bids worth UGX 89.6 billion, marking a strong bid-to-cover ratio of 3.0.

The 91-day bill cleared at an annualized discount rate of 10.705 percent, translating into a money market yield of 10.999 percent and an effective yield of 11.461 percent. The 182-day and 364-day tenors attracted even higher rates of 12.478 percent and 13.306 percent, respectively, while the longest tenor reached a peak rate of 14.903 percent — reflecting higher returns demanded by investors amid inflationary pressures and rising domestic borrowing.

The total amount accepted stood at UGX 30.87 billion, while total tenders received reached nearly UGX 90 billion, underscoring the strong liquidity in the money market and continued investor preference for risk-free government instruments.

Market analysts say the uptick in yields across maturities reflects both investor expectations of tighter monetary policy and a cautious stance ahead of year-end fiscal adjustments. “The rise in yields indicates that investors are pricing in higher inflation and possible domestic financing needs by government,” one fixed income dealer noted.

The Bank of Uganda continues to use Treasury Bill auctions to manage short-term liquidity and support the implementation of monetary policy. Proceeds from these auctions are also used to refinance maturing government debt and fund budgetary operations.

Treasury Bills remain a key instrument for both institutional and retail investors, offering attractive short-term returns amid volatile regional markets. The securities are issued in 91-day, 182-day, and 364-day tenors and are auctioned weekly through the Central Securities Depository.

Financial analysts expect yields to remain stable in the near term as the central bank balances liquidity management with fiscal financing requirements under the FY2025/26 domestic borrowing program.