The Bank of Uganda (BoU) is preparing to hit the domestic debt market with a Shs 1.4 trillion bond auction scheduled for Wednesday, August 6, 2025, offering a mix of short, medium, and long-term securities in a bid to support government operations and manage public debt obligations.
This multi-tenure issuance includes four distinct bond offerings:
2-Year Re-Opening (14.125%, due Jan 13, 2028) – Shs 200 billion
5-Year New Issuance (Maturing Aug 01, 2030) – Shs 300 billion
15-Year Re-Opening (15.800%, due Jun 23, 2039) – Shs 400 billion
25-Year New Issuance (Maturing Jul 07, 2050) – Shs 500 billion
The central bank has confirmed that the settlement date for successful bids will be Thursday, August 7, just a day after the auction closes.
Extending Debt Maturity, Managing Risk
This latest auction is part of a broader strategy to lengthen Uganda’s debt maturity profile and reduce refinancing pressures, in line with the government’s medium-term debt management framework. With the introduction of the new 5-year and 25-year bonds, BoU signals a deliberate pivot toward deeper, longer-term domestic financing.
The 2-year and 15-year reopenings, meanwhile, aim to deepen liquidity in existing benchmarks.
These tenures also come with attractive coupon rates of 14.125% and 15.800%, designed to appeal to major institutional investors such as pension funds, insurers, and commercial banks.
In a market still adjusting to tight liquidity conditions and early-stage fiscal consolidation, the timing of this auction is strategic.
Long-term instruments offer a chance to lock in current interest rates, shielding both government and investors from future market volatility.
Taxation and Participation Terms
BoU has outlined the withholding tax structure:
20% for the 2-year and 5-year bonds
10% for the 15-year and 25-year instruments
This tiered approach favors longer-duration investors and may boost appetite for the rare 25-year bond, a tenure seldom offered in African debt markets.
Minimum bid requirements are set at Shs 100 million for competitive bids and Shs 100,000 for non-competitive bids. All bids are to be submitted using the yield-to-maturity (YTM) format, with market indicators placing expected yields at 14.125% for the 2-year and 15.800% for the 15-year bond, referencing previous trades.
Market Watch: Confidence vs. Concern
Analysts say the upcoming auction will serve as a barometer of investor confidence in Uganda’s fiscal path, particularly amid concerns over rising public debt.
The country’s total debt stood at Shs 96 trillion, about 50.4% of GDP, by the close of FY2024/25, according to the Ministry of Finance.
“The issuance of a 25-year bond is a bold move,” said a fixed-income analyst at Stanbic Bank Uganda. “It offers pension schemes and long-horizon funds a rare opportunity to lock in relatively high yields for a long period, but its success will depend on market confidence in the government’s fiscal trajectory.”
This auction comes on the heels of the Shs 72.1 trillion FY2025/26 national budget, tabled earlier by the Minister of Finance, with Shs 9.5 trillion earmarked for financing through domestic borrowing.
Treasury bonds remain a cornerstone of that strategy, offering a predictable and localized funding stream.
Strengthening the Capital Markets
BoU’s continued transparency in releasing auction schedules and detailed bond information is widely regarded as a key step in building investor trust and developing Uganda’s domestic capital markets.
As the government seeks to finance infrastructure, education, and healthcare without deepening external borrowing risks, bond sales like this are expected to become even more central to Uganda’s public finance playbook.
Market players will be watching the results closely following the August 7 settlement, particularly investor behavior toward the 5-year and 25-year tenures, which could offer insights into future interest rate expectations and investor sentiment around Uganda’s fiscal discipline.
