Uganda’s recent actions in the Treasury bond market, between August and September 2025, have left investors uncertain, as the government appears to be making inconsistent and hesitant moves. These developments come amid mounting domestic borrowing needs and rising debt servicing costs, The EastAfrican has learnt.

A Treasury bond auction conducted in August revealed that the government offered Ush1.4 trillion ($398.9 million) in debt paper to investors and received total bids worth Ush2.2 trillion ($626.8 million), according to market sources.

However, the government accepted bids totalling only Ush435 billion ($123.9 million), significantly below the targeted amount. A subsequent bond auction had a target of Ush500 billion ($142.5 million), markedly lower than the amount offered in the previous auction.

Trading results from an emergency bond auction held on September 3 showed the government raised Ush200 billion ($56.9 million) from a three-year bond offer with a yield of 16 percent.

An additional Ush70.556 billion ($20 million) was raised from a 10-year bond with a yield of 17.15 percent. A 20-year Treasury bond offer raised Ush10 billion ($2.85 million) with a final yield of 17.95 percent, indicating the government’s preference for significant new domestic debt at lower interest rates.

The fiscal deficit, a key indicator of the government’s borrowing appetite, stood at Ush974.56 billion ($277.7 million) in August 2025, compared to a projected Ush587.49 billion ($167 million) for the same period.

Tax revenue collections for August 2025 amounted to Ush2,593.43 billion ($738.9 million) against a target of Ush3,049.51 billion ($868.9 million), reflecting a revenue shortfall of Ush456.08 billion ($129.9 million), according to data compiled by Uganda’s Ministry of Finance.

The Central Bank Rate has been stable at 9.75 percent for some time,” he explained.“Why should bond yields be shooting through the roof at this time? Tax revenues are underperforming, and government spending needs are growing.”The bank said these developments suggested higher borrowing levels for the government, and as a result, the government is faced with two hard options: either pursue large debt auctions that carry higher debt yields or opt for smaller debt auctions with lower yields and reduced debt servicing costs.“We expect debt yields will eventually go down due to reduced inflation, a stronger exchange rate, and improved economic growth trends,” the official added. Analysts of these auctions say investors are still bothered by the controversial pricing of the 25-year Treasury bond.

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