High Returns Ahead! Why Now is the Time to Invest in Treasury Bonds
Friends,
Treasury bonds, especially the 20-year treasury bond, yesterday returned a 17.945%, which is almost 18%. This auction was important because it is the first one after nearly all bids were rejected in April 2025 long term bond auction.
It’s also coming at a time when we are also hearing rumors of a private auction that could happen soon, making this auction even more significant. For the first time in over two years, we are seeing a 17.9% return yield for a long-term bond that is about to pay a coupon, which is great news for long-term investors in the treasury bond market.
However, a big question arises: are we putting the country’s finances at risk? We are getting close to a critical point in interest rates. As I often say, anything above 17% is considered excellent in the treasury bond market, but we are not yet in a situation that should cause panic.
For us Ugandans, this is actually a good time; if you have cash sitting idle in a bank account, it would be wise to think about investing it in treasury bonds or, at the very least, in a unit trust. There are clear benefits to investing in treasury bonds, and with the current trends, unit trusts are also starting to yield returns of 14% and above, as they invest in treasury bonds that offer higher returns.
Should we be worried as Ugandans? Yes, there is a point where we need to be cautious. Our national debt has recently crossed 100 trillion shillings, and it keeps growing, especially as we approach election season.
The political risks that come with elections often lead to increased spending on various projects, some of which may not be beneficial. However, this situation also presents an opportunity. As Investors, while it’s natural to worry, it’s also a time to take advantage of the current market conditions. When you see the Bank of Uganda offering rates around 18%, 17.5%, or 17%, and a three-year bond yielding 16.5%, it is indeed a great time to invest.
You can be assured that the government is capable to meet its obligations. There is no need to fear that the bond market will crash just because we are entering an election period filled with uncertainties.
The high returns we are seeing now remind us of past trends; we have seen similar rates as recently as two and a half years ago, and even 20% returns back in 2011 are not too far from where we are today. Investing now, especially in five, ten, or fifteen-year bonds, allows you to lock in good interest rates.
Interest rates may rise again, but if you have the money available now, don’t wait for the 18% mark to invest. You can still secure a 15.5% after tax return. I estimate we have less than 12 months before rates drop back to 16%, 15%, or even 14%.
Looking at Kenya, they once had treasury bill rates reaching 19%, and those who entered the market at that time enjoyed significant benefits. Currently, long-term bonds in Kenya have fallen to 13%, and medium-term bonds are at 11%.
If you have money to invest, consider treasury bonds. If this is your first time investing and you are unsure how to proceed, reach out for guidance. You will benefit greatly from making informed investment decisions. If you are not a first-time investor but still want to explore ways to profit from treasury bonds, feel free to contact me.
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