Bank of Uganda seeks Shs990b through Treasury bond auction

KAMPALA — The Bank of Uganda (BoU) has invited investors to bid for Shs990 billion worth of government Treasury bonds in an auction scheduled for Wednesday.

The auction, which will be settled on Thursday, will offer three securities with maturities of three, 10 and 20 years, according to a notice issued by the central bank under the Public Finance Management Act, 2015.

The three-year bond, which is being issued for the first time, has a face value of Shs230 billion and matures on September 6, 2029. Interest earned on the bond will be subject to a 20 per cent withholding tax.

The 10-year bond is a re-opening of an existing security maturing on May 14, 2037. It carries a coupon rate of 16 per cent and has an offered amount of Shs330 billion. Interest is subject to a 10 per cent withholding tax.

The largest portion of the auction, Shs430 billion, will be raised through a new 20-year Treasury bond maturing on August 16, 2046. It will also attract a 10 per cent withholding tax.

The auction is part of government’s regular borrowing programme to raise funds from the domestic market to finance its budget.

How to participate

Primary dealer banks and commercial banks are required to submit competitive and non-competitive bids through the Central Securities Depository by 10am on September 9.

Only authorised primary dealer banks can submit competitive bids.

The authorised dealers are Absa Bank, Citibank, Centenary Bank, DFCU Bank, Equity Bank, Housing Finance Bank, Stanbic Bank and Standard Chartered Bank.

The minimum bid for competitive applications is Shs200.1 million, while non-competitive bids start at Shs100,000.

Non-competitive bids will be accepted in full at the cut-off price or yield to maturity, subject to a maximum allocation of Shs200 million per tenor.

Successful competitive bids will be allocated at a single price, based on the lowest accepted auction price, which corresponds to the highest accepted yield to maturity.

Bidders must quote prices per Shs100 to three decimal places.

The central bank reserves the right to adjust the amount offered or reject bids, either partially or wholly.

The auction will take place on September 9, with settlement scheduled for September 10.

The Treasury bond market allows government to raise longer-term financing while giving investors an avenue to earn interest from government securities.

Investors can access detailed information on the securities through the prospectuses published by the Bank of Uganda.