Investors pile into Uganda’s treasury bonds, seek Shs2.07 trillion

KAMPALA — Strong investor demand for government debt has enabled the Bank of Uganda to raise Shs620 billion in its latest Treasury bond auction, with bids more than twice the amount the central bank had offered.

Investors submitted bids worth Shs2.07 trillion for the three-year, 10-year and 20-year Treasury bonds auctioned on September 9, against a combined offer of Shs990 billion.

Despite the heavy demand, the central bank accepted Shs620 billion in competitive bids as it sought to balance government financing needs with borrowing costs.

The 20-year bond attracted the strongest demand, drawing bids worth Shs1.13 trillion against an offer of Shs430 billion. This translated into a bid-to-cover ratio of 10.81, meaning investors sought more than 10 times the amount available.

However, BoU accepted only Shs105 billion of the bids for the 20-year paper at a cut-off yield of 15 per cent.

The three-year bond, which matures in September 2029, attracted bids worth Shs498.8 billion against an offer of Shs230 billion. BoU accepted Shs249 billion at a cut-off yield of 12 per cent, giving the paper a bid-to-cover ratio of 2.0.

The 10-year bond, which matures in May 2037, received bids worth Shs440.6 billion against an offer of Shs330 billion. The central bank accepted Shs266 billion at a cut-off yield of 15 per cent, giving it a bid-to-cover ratio of 1.65.

Non-competitive bids across the three securities amounted to Shs23.7 billion and were accepted in full.

The strong demand, particularly for the long-dated 20-year security, signals continued investor appetite for government securities despite the relatively high yields.

The auction also comes as government seeks to manage its financing requirements while keeping borrowing costs and public debt under control.