BoU seeks Shs990 billion in latest Treasury bond auction

The Bank of Uganda (BoU) will this week seek to raise Shs990 billion from investors through the sale of Treasury bonds as the government continues to finance its budget and refinance maturing domestic debt.

According to the latest auction notice, the central bank will auction three Treasury bonds worth a combined Shs990 billion on Wednesday, July 15.

The offer comprises a three-year bond valued at Shs230 billion, a 10-year bond worth Shs330 billion and a 20-year bond valued at Shs430 billion.

The three-year bond is a reopening of the 15.55 percent Treasury bond maturing on July 6, 2028, while the 10-year and 20-year securities are reopenings of bonds maturing on May 14, 2037 and June 18, 2043, respectively.

The auction will be settled on Thursday, July 16.

Treasury bonds are long-term government securities issued to finance public expenditure and refinance existing debt. Investors earn fixed interest payments over the life of the bond before recovering their principal at maturity.

The three-year bond will attract a 20 percent withholding tax on interest income, while investors in the 10-year and 20-year securities will benefit from a lower 10 percent withholding tax, in line with government policy aimed at encouraging investment in longer-term instruments.

Primary Dealer banks and other commercial banks are required to submit both competitive and non-competitive bids electronically through the Central Securities Depository by 10am on the auction date.

The minimum competitive bid has been set at Shs200.1 million, while non-competitive investors can participate with a minimum investment of Shs100,000. Non-competitive bids will be accepted in full up to Shs200 million per tenor at the auction’s cut-off yield.

Only licensed Primary Dealer banks are permitted to submit competitive bids. These include Absa Bank Uganda, Citi Bank Uganda, Centenary Bank, dfcu Bank, Equity Bank Uganda, Housing Finance Bank, Stanbic Bank Uganda and Standard Chartered Bank Uganda.

The Bank of Uganda said it reserves the right to increase or reduce the amount offered, or to accept or reject bids in whole or in part depending on market conditions.

Government securities have remained attractive to institutional and retail investors seeking relatively low-risk investment options, with demand supported by competitive yields and favourable tax treatment for longer-dated bonds.