Why investing in Treasury Bills is not only for the rich

Ugandans have been urged to invest in Treasury Bonds and Bills and not leave them only to elites or the rich.

According to Bank of Uganda, any ordinary person can invest in the securities, which are considered less risky year lucrative.   

Treasury bills are short term (1 year or less) debt instruments issued by Government regularly to the investing public. Treasury bills are issued with maturities of 3 months, 91 days, 6 months, 182 days, 12 months and 364 days. The treasury bills are issued in multiples of Shs 100,000, starting with a minimum of Shs 100,000.

Treasury bonds are long-term debt instruments issued by the Government through the Bank of Uganda to the investing public. Treasury Bonds are issued with maturities of 2, 3, 10, 15, and 20 years. 

According to Dr. Charles Abuka, the Executive Director of Operations at the Bank of Uganda, treasury bills or bonds offer a higher return than most of the investments available, while also being secure.

According to the Ministry of Finance’s Economy performance report for the month of October, the increased demand for government securities by both the local and offshore investors and continuous need for money by the government for budget operations led to a continuous rise in yields for government securities between August and December 2022.

According to Dr Abuka, government securities can also be used as collateral by the investor for borrowing purposes. This investment option gives the individual an opportunity to diversify their portfolio into an investment with minimal credit risk.

For an individual to invest in treasuries, one is required to open a Treasury Bills account on the Central Depository System (CDS) which is like ‘an electronic warehouse for the treasuries’ and handles all related transactions. 

The account is opened through a licensed agency, commercial bank, investment advisor, or brokers, according to the Uganda Securities Exchange. These deal directly with the Central Bank as Primary Dealers, through which buyers submit their bids, and once the bid is successful, the banks deduct the bid amount from the bidder’s account.

Currently, there are seven Primary Dealers; ABSA Bank, Bank of Baroda, Centenary Bank, DFCU Bank, Housing Finance Bank, Stanbic Bank, and Standard Chartered Bank, which transact with the BOU on behalf of their clients. Once the treasuries are sold at the Primary Market (from the Bank of Uganda), dealers can continue trading in them on the secondary market with those willing to sell theirs to those willing to buy.

Dr Abuka says one needs a minimum of Shs100,000 to buy treasury bonds, and incrementally only in multiples of Shs100,000.

Investing treasury bonds does not mean on spot payments. It takes one some time to get paid.
Dr Abuka says that one is paid coupons semi-annually on the exact dates specified in the Invitation to Tender at the time of the issue, and the principal is paid with the last coupon on the maturity date of the treasury bond.