The Sweetest 17.5% yield Treasury Bond Auction. 20 Year Treasury Bond
Nov 27, 2024
“Retail investors in this week’s Auction have eaten big, with the latest 17.5% yield of the 20 year treasury bond at a time when the bond has 42 days to go to pay a coupon.”
Friends
The latest Treasury Bond Auction results from the Bank of Uganda (BoU) have been released, with particularly strong interest in the 20-year Treasury Bond.
In a notable and interesting development, for the first time in 24 months, the yield on Uganda's long-term 20-year treasury bond has surpassed the 17% mark, a level last observed in the 2022/2023 Auction.
This comes at a time when tomorrow, November 28, 2024, the Treasury department has paid out close to UGX 330 Billion in coupon incomes related to 3 bonds and 1 maturing treasury bill .
Investors were offered a substantial discount of approximately 14% in shillings for their participation. This translates to a 'clean price' of 86.2 UGX for every 100 UGX invested, reflecting the 12% discount for such investments.
The 'dirty price'—which includes accrued interest—stands at 92 UGX per 100 UGX due to the impending coupon payment scheduled for Jan 9, 2025.
For example, an investor purchasing a 100 million UGX bond from the BoU would pay only 92 million UGX for the bond, yet stand to receive about 6.75 million UGX in coupon payments within 42 days. Similarly, an investment of 200 million UGX in bonds would require a payment of 184 million UGX, with the investor poised to earn approximately 13.5 million UGX in coupon payments in the same timeframe.
Significantly, the government tendered a total of 990 billion UGX, attracting bids exceeding 1 trillion UGX. However, only 712 billion UGX was accepted in this auction. This raises the question of whether the government is exercising caution in its borrowing strategy as we gear up for what promises to be an amazing 2025 year.
