The Bank of Uganda is set to raise up to Shs990 billion through a reopening of three government Treasury bonds, giving banks and other eligible investors another opportunity to invest in Uganda’s domestic debt market.
The central bank will auction three-year, 10-year and 20-year Treasury bonds on Wednesday, October 7, 2026, with settlement scheduled for October 8, according to an invitation to tender issued by the Bank of Uganda.
The auction will comprise Shs230 billion of the three-year bond, Shs330 billion of the 10-year bond and Shs430 billion of the 20-year bond.
The three-year security carries a 12% coupon rate and matures on September 6, 2029, while the 10-year bond carries a 16% coupon and matures on May 14, 2037.
The longest-dated security, a 20-year Treasury bond, carries a 15% coupon rate and matures on August 16, 2046. All three securities are being reopened, meaning investors will be buying additional amounts of bonds that are already in circulation.
Banks take centre stage
The auction will be particularly important for Uganda’s banking sector because only Primary Dealer banks are permitted to submit competitive bids.
The current Primary Dealers are Absa Bank, Citi Bank, Centenary Bank, dfcu Bank, Housing Finance Bank, Stanbic Bank and Standard Chartered Bank. Other commercial banks can submit non-competitive bids through the prescribed system.
All competitive and non-competitive bids must be submitted through the Central Securities Depository by 10 a.m. on October 7, the Bank of Uganda said.
The minimum competitive bid is Shs200.1 million, while the minimum non-competitive bid is Shs100,000, widening access to the auction for investors who do not participate directly in competitive bidding.
Investors eye fixed-income returns
The three securities offer investors different maturity profiles, allowing banks and other eligible participants to position their portfolios according to their liquidity and investment strategies.
The relatively high coupon rates — ranging from 12% to 16% — make the securities an important component of the domestic fixed-income market, although the actual yield investors receive at auction will depend on the prices at which the bonds are allocated.
The Bank of Uganda said successful competitive and non-competitive bids will be allocated at a single price, based on the lowest accepted auction price per Shs100, corresponding to the highest accepted auction yield.
For investors, this means the auction’s final cut-off price and yield will be closely watched because they will determine the effective return on the securities bought at the auction.
Government borrowing and the banking market
The Shs990 billion offering underscores the continuing role of the domestic financial market in mobilising funds for government.
Treasury securities provide government with a way of raising financing from the domestic market while giving banks and investors instruments through which they can deploy surplus liquidity and earn interest.
For commercial banks, government securities can also form an important part of their investment portfolios and liquidity management strategies. The auction therefore has implications beyond the immediate funds raised, particularly for how banks allocate available resources between government securities and private-sector lending.
The Bank of Uganda, however, retains the flexibility to increase or reduce the amount offered and to accept or reject applications, either wholly or partially, depending on auction conditions.
Tax treatment varies by tenor
The three bonds also carry different withholding-tax rates.
The three-year bond is subject to 20% withholding tax, while the 10-year and 20-year securities attract 10% withholding tax, according to the auction notice.
The difference is relevant to investors assessing the after-tax return from each instrument rather than relying solely on the headline coupon rate.
With the auction scheduled for October 7, banks and eligible investors will now position their bids ahead of the 10 a.m. deadline as the government seeks to raise nearly Shs1 trillion from the domestic debt market.
The auction will provide a fresh indicator of investor demand for Uganda’s government securities and the yields investors are willing to accept for lending to the government across short-, medium- and long-term maturities.
