Uganda’s new 25-year Treasury bond stunned investors after debuting at a 16% yield, far below expectations of 17–18%, The East African reported.

The inaugural auction on August 6 attracted bids worth UGX851.1bn ($237.8mn) against an offer of UGK500bn ($139.7mn), but the Bank of Uganda (BoU) accepted only UGK57.165bn ($15.97mn).

The yield came in lower than the 17.65% on the 15-year bond and the 17.5–17.9% range on the 20-year bond traded in the secondary market, marking a major departure from standard yield curve pricing.

A report from Impala Market Staff dated August 7 said the BoU deliberately capped issuance despite “overwhelming demand”. It stated, as quoted by The East African, “The limited acceptance... signals a line in the sand. The market clearly priced in a higher yield, but BoU refused to validate those levels.”

Uganda’s move reflects a wider trend among African governments to issue longer-dated instruments to manage refinancing risks. Extending maturities is seen as a way to attract institutional investors such as pension funds and insurers while easing budgetary pressures.

According to Uganda’s Ministry of Finance, public debt stood at $24.6bn as of December 2023, with domestic debt at $9.96bn, or 40.5% of the total.

“The [ministry] is trying to control debt servicing costs by all means possible,” George Mulindwa, general manager at GenAfrica Asset Managers Uganda Limited, told The East African.

Mubbale Kabandamawa-Mugalya, general manager at Sanlam Investments Uganda Limited, told the publication market functions on a “willing sellers and buyers” basis and added that if the yield is fixed at 16%, “the BoU must ensure it fits within the government’s debt servicing budget.”

As bne IntelliNews reported, the BoU also held a rare Treasury bond auction on May 27, targeting UGX2.4 trillion ($658.76m) through seven reopened bonds maturing between 2028 and 2044. Primary dealers included Stanbic, Absa, Equity, Centenary, dfcu, Housing Finance, Citibank, Bank of Baroda, and the National Social Security Fund.

Kenneth Okwenje of African Alliance Uganda, part of Africa-focused investment bank African Alliance, said the next auction in November will offer more clarity on pricing.