Uganda raises Shs3.3 trillion from treasury bonds in January

Uganda’s domestic debt market opened 2026 on a strong note, with government raising more than Shs3.3 trillion in January amid falling interest rates and renewed investor confidence following the election period.

According to the January 2026 Performance of the Economy Report, government mobilised Shs3,331.83 billion from three auctions of Treasury instruments on the domestic primary market. Of this amount, Shs376.96 billion was raised from Treasury Bills, while Shs2,954.88 billion came from Treasury Bonds.

The bulk of the funds—Shs2,574.98 billion—was channelled toward financing budgeted expenditures, while Shs756.85 billion was used to refinance maturing securities, reflecting a continued reliance on domestic borrowing to plug fiscal gaps and roll over existing debt.

Interest rates declined across both short- and long-term instruments during the month, signalling improved liquidity conditions and strong appetite for government paper.

Annualised yields on Treasury Bills edged downwards across all tenors. The 91-day paper fell to 11.2 percent in January from 11.5 percent in December 2025. The 182-day tenor dropped sharply to 12.7 percent from 13.7 percent, while the 364-day bill eased to 14.0 percent from 14.9 percent.

All Treasury Bill auctions during the month remained oversubscribed, posting an average bid-to-cover ratio of 2.16. This means that for every Shs1 on offer, investors placed bids worth more than Shs2, underscoring robust demand for short-term government securities.

Treasury Bond yields also declined compared to previous issuances of similar maturities, reinforcing the downward trend in borrowing costs.

The two-year bond yield fell to 15.10 percent from 15.75 percent, while the three-year eased to 15.90 percent from 16.0 percent. The five-year tenor declined to 15.50 percent from 16.25 percent.

Longer-dated bonds registered similar reductions. The 10-year yield slipped to 16.75 percent from 17.15 percent, the 15-year fell to 16.48 percent from 17.75 percent, and the 20-year bond declined to 17.63 percent from 17.95 percent.

The broad-based decline in yields points to easing pressure on domestic borrowing costs and signals improving investor sentiment toward government securities.

Economists attribute the stronger demand partly to renewed market confidence following the conclusion of the election cycle, which had previously injected uncertainty into financial markets. The higher bid-to-cover ratios reflect increased participation from commercial banks, pension funds and institutional investors seeking relatively risk-free returns amid stable macroeconomic conditions.

Lower yields translate into reduced interest expenses for government over time, potentially easing pressure on the national budget. However, analysts caution that sustained heavy domestic borrowing could crowd out private sector credit if not carefully managed.

The Shs3.3 trillion raised in January highlights the scale of government financing needs, as authorities balance refinancing obligations with funding for ongoing public expenditure.

With demand for government securities remaining strong and yields trending downward, the domestic debt market appears to have entered 2026 on firmer footing. The trajectory of interest rates in the coming months will likely depend on inflation dynamics, liquidity conditions and the pace of fiscal consolidation.

For now, January’s auction results signal restored investor appetite and a measure of stability in Uganda’s domestic financial markets at the start of the new year.