Start 2025 in style. The Upcoming Treasury Bonds Auction.
December 31, 2024
Friends,
2024 has been a year of having honest investment conversations with an incredible community. I have interacted with many of you in different capacities, and I would like to thank you for enabling this platform to grow into what it is today.
From the Treasury bond world, it has been close to 5 weeks since we last had a treasury bond auction. Next week, the Government, through the Bank of Uganda, will be auctioning off three treasury bonds with a target raise of UGX 990 billion.
The Breakdown
UG12G0907265: 2-Year Treasury bond with a coupon rate of 13.5% and WHT of 20% Maturing in July 2026. (Last time it auctioned at a cut off yield of 15.75%)
UG0000001533: 5-Year Treasury bond with a coupon rate of 14.25% and WHT of 10% maturing in August 2029.
Yes, this 5 year bond has a withholding tax of 10% because its a reopened bond which was first issued in 2014 as a 15 year bond, and the Treasury re-opened it as a 5 year bond in this calendar year.
It last auctioned at a 16% cut off yield in the primary market.
The 5-year bond pays a coupon every February and August, so investors who already have on their portfolio bonds paying in January and July (The current 20- & 15-year bonds), this 5-year bond might be an attractive option to ladder your bond.
UG12K2306393: 15-Year Treasury bond with a coupon rate of 15.8% and WHT of 10% maturing in June 2039.
The 15 year bond last auctioned off at a cut off yield of 16.75%.
The bond will pay a coupon on January 9, 2025 on the day of the settlement of the Auction, which means anyone who invests on this day will be investing on Day 0 of the next coupon payment which will take place in July 2025 which makes it a good time to buy the bond at a discount and build accrued interest by holding it for a period.
If you want to earn some coupon on January 9, 2025, by investing in the 15-year bond, you will have to buy it on the secondary market and given that it’s about to pay a coupon, it has accumulated significant accrued interest and thus currently trading at a premium across major players.
