Bank of Uganda floats Shs990b in latest treasury bond offer

KAMPALA — The Bank of Uganda has invited investors to purchase Shs990 billion worth of Uganda Government Treasury Bonds in a fresh debt sale aimed at financing government operations and managing liquidity in the economy.

In a public notice issued on February 13, the central bank announced the reopening of three benchmark bonds — a three-year, 10-year and 20-year tenor — to be auctioned on Wednesday, February 18, 2026, with settlement slated for the following day.

The offering includes Shs230 billion under a three-year bond maturing on July 6, 2028, carrying a coupon rate of 15.550 percent; Shs330 billion under a 10-year bond maturing on November 8, 2035, with a coupon of 16.250 percent; and Shs430 billion under a 20-year bond maturing on June 18, 2043, at a coupon rate of 15.000 percent.

The issuance is being conducted under the Public Finance Management Act, 2015.

Managing deficits and liquidity

The reopening of long-dated bonds signals sustained government appetite for domestic borrowing as authorities balance infrastructure spending, debt servicing obligations and broader fiscal pressures.

Government securities — Treasury bills and bonds — remain a key source of domestic financing for the Treasury. In recent years, domestic debt has grown steadily, with pension funds, commercial banks and institutional investors holding the largest share.

By offering longer tenors, the government seeks to spread out repayment obligations over time and reduce short-term refinancing risks. Long-dated instruments such as the 20-year bond are particularly attractive to institutional investors like the National Social Security Fund and insurance firms seeking predictable, long-term returns.

The bonds will be auctioned through the Central Securities Depository (CSD), with only Primary Dealer Banks permitted to submit competitive bids. Current primary dealers include Absa Bank, Citi Bank, Centenary Bank, DFCU Bank, Equity Bank, Housing Finance Bank, Stanbic Bank and Standard Chartered Bank.

Attractive yields in a tight monetary environment

The coupon rates — 15.550 percent for three years, 16.250 percent for 10 years and 15.000 percent for 20 years — reflect Uganda’s relatively high-yield domestic debt market, shaped by tight monetary conditions in recent years as the central bank moved to contain inflation and stabilize the shilling.

Although inflation has eased from previous highs, interest rates remain elevated compared to pre-pandemic levels, making government securities attractive to investors seeking low-risk returns.

Successful bidders will be allocated securities at a single price — the lowest accepted auction price, corresponding to the highest accepted yield to maturity. Competitive bids must have a minimum value of Shs200.1 million, while non-competitive bids start at Shs100,000 and are capped at Shs200 million per tenor.

Withholding tax stands at 20 percent for the three-year bond and 10 percent for the 10- and 20-year bonds.

Growing domestic debt burden

Uganda’s domestic debt has expanded sharply over the past decade, driven by increased infrastructure investment, budget support needs and revenue shortfalls. While domestic borrowing shields government from foreign exchange risk associated with external loans, it also crowds out private sector credit when commercial banks allocate significant portions of their balance sheets to risk-free government paper.

Economists warn that continued heavy domestic borrowing could keep interest rates elevated, raising the cost of capital for businesses and households.

At the same time, government securities provide a crucial savings and investment vehicle for institutions and individuals. The reopening of benchmark bonds enhances liquidity in the secondary market, allowing investors to trade more easily.

The central bank has reserved the right to increase or reduce the amount offered and to accept or reject bids in whole or in part, depending on market conditions.

As Uganda navigates fiscal consolidation pressures and rising debt servicing costs, the February 18 auction will offer an important signal of investor appetite and confidence in the government’s domestic debt programme.