BoU seeks Shs990b in Treasury bond auction

KAMPALA. The Bank of Uganda (BoU) is seeking to raise Shs990 billion through a Treasury bond auction scheduled for Wednesday as the government turns to domestic markets to finance its fiscal requirements.

The central bank has invited investors to bid for three Treasury bond instruments with maturities of two, five and 15 years.

The auction will be conducted on August 26, with bids closing at 10am. Successful investors will receive their securities on August 27, according to the BoU auction notice.

The 15-year bond, which carries a coupon rate of 15.8 per cent, accounts for the largest share of the planned borrowing at Shs430 billion. It matures on June 23, 2039.

The five-year bond, carrying a coupon rate of 15 per cent, is expected to raise Shs330 billion and matures on May 20, 2032.

The remaining Shs230 billion will come from a reopening of a two-year Treasury bond carrying a 15.25 per cent coupon rate and maturing on November 16, 2028.

The auction will use a single-price Dutch auction system, under which successful bidders are allocated securities at the lowest accepted price, corresponding to the highest accepted yield to maturity.

The latest borrowing comes as government continues to rely on the domestic debt market alongside other sources of financing to meet its budgetary needs.

Investors in the longer-term five-year and 15-year securities will also benefit from a lower withholding tax rate of 10 per cent, compared with 20 per cent applicable to the two-year bond.

The tax differential is intended to make longer-term government securities more attractive to investors seeking relatively stable returns over extended periods.

Only authorised primary dealer banks can submit competitive bids directly to the auction. They include Absa Bank Uganda, Citibank Uganda, Centenary Bank, dfcu Bank, Equity Bank Uganda, Housing Finance Bank, Stanbic Bank Uganda and Standard Chartered Bank Uganda.

Competitive bids must have a minimum value of Shs200.1 million.

Other investors, including individuals and institutions, can submit non-competitive bids starting at Shs100,000 and up to Shs200 million per tenor.

Non-competitive bids are allocated in full at the final cut-off price, subject to the terms of the auction.

The auction is part of government’s regular domestic borrowing programme through which it raises funds while providing investors with an avenue to invest in government securities.

The size and pricing of Treasury auctions are closely watched by financial institutions because they influence borrowing costs in the domestic market and can affect liquidity and interest rates.

The latest auction also comes against the backdrop of government’s efforts to mobilise financing for its 2026/27 budget as it seeks to fund infrastructure and other development priorities.