The Predictions at a Glance

Bonds with Predicted Cut-Off Yield and Expected Range:

• 3-Year (Jul 2028): Predicted(~15.00%); Expected Range (14.75% – 15.25% )

• 10-Year (Nov 2035): Predicted(~14.75%); Expected Range(14.50% – 15.25%)

• 20-Year (Jun 2043): Predicted (~15.60%); Expected Range (15.25% – 16.00%)

These reflect a policy environment that has been actively shaping primary market outcomes since the beginning of the year.

The Story Behind the Numbers

1. BOU’s Yield Suppression Campaign

The single most important driver of this forecast is the deliberate rate compression strategy that the Bank of Uganda and the Ministry of Finance launched following the January 15, 2026 elections. The evidence from recent auctions is unambiguous.

In the February 2026 auction, the 10-Year bond cleared at 14.50% — a full 225 basis points below January’s cut-off of 16.75%. This was not a market-driven move. BOU achieved this by rejecting the vast majority of bids submitted above that level. Then in March, on the 15-Year bond, BOU accepted only UGX 20 billion out of UGX 598 billion tendered, a rejection rate of approximately 97%.

This was a deliberate signal: the government intends to set the narrative on rates, not simply follow the market.

For April, our base case is that BOU allows a modest upward drift from February’s suppressed levels, enough to clear the UGX 990 billion on offer and attract sufficient genuine demand, while preserving the downward policy narrative.

2. The Gap Between Primary and Secondary Markets

One of the most telling signals right now is the spread between where bonds are clearing in primary auctions versus where they are actually trading in the secondary market.

Currently:

• The 10-Year trades in the secondary market at approximately 15.50%

• The 20-Year trades at approximately 16.00%

These levels are 100–150 basis points above the yields at which BOU cleared the February primary auction. This gap tells us that the broader market does not believe February’s yields were the true clearing price. Investors are pricing in that primary auctions are being administered below fair value. For April, this secondary market pricing is our most reliable anchor for where yields could realistically settle if BOU relaxes suppression slightly.

3. Inflation Gives BOU Policy Room

Uganda’s inflation rate stood at 2.80% as of March 2026, comfortably below the Bank of Uganda’s 5% target. With the Central Bank Rate (CBR) held at 9.75%, the real policy rate is approximately +700 basis points above inflation — an unusually high level that gives BOU significant room to continue compressing nominal rates without triggering inflation concerns.

Policymakers can credibly argue that even at 14.75–15.00%, bond yields remain highly attractive in real terms. This macroeconomic backdrop is important: it is what makes the suppression strategy sustainable in the near term, and it is why BOU is unlikely to reverse course in April.

4. Why the 20-Year Carries a Premium

The 20-Year yield prediction of ~15.60% is notably above the 10-Year at ~14.75%, reflecting a modest but deliberate term premium. Duration risk is real in Uganda’s context: political uncertainty, fiscal dynamics, and exchange rate movements over a 20-year horizon are not trivial. Investors demanding this tenor typically expect compensation, and BOU has historically been more willing to let longer-dated yields sit higher to secure clearance on that part of the curve. Our 15.60% call reflects this dynamic, and sits roughly midway between the suppressed primary levels and the secondary market’s current 16.00% read.

What This Means for Market Participants

For investors considering participation in the April 15 auction, the key question is how much further BOU will let yields drift upward from February’s lows. Our analysis suggests a partial normalisation — bids submitted in the range of 14.75–15.25% on the 10-Year and 15.25–15.75% on the 20-Year are most likely to be accepted. Bids that push significantly above these levels risk rejection, as BOU has demonstrated it is willing to leave paper on the table to protect its rate narrative.

For secondary market traders, the compression of the primary-secondary spread remains the central trade to watch. If April’s auction clears closer to secondary market levels, it would signal a meaningful shift in BOU’s approach and could trigger a repricing across the curve.

For corporate treasurers and institutional buyers benchmarking against government paper, the current environment warrants caution about using February’s primary yields as reference rates. Secondary market levels remain a more reliable guide to true market pricing until primary auctions consistently reflect open competitive outcomes.

Key Risks to This Outlook

No forecast is without risk. The main scenarios that could push outcomes outside our predicted ranges are:

• Higher-than-expected rejection rates: If BOU again rejects the bulk of bids (as in March), cut-off yields could print below our estimates, or the auction could be undersubscribed, forcing a partial rollover.

• Demand surge from institutional investors: Strong pension fund or commercial bank participation could allow BOU to clear at the lower end of each range without significant rejection.

• Policy shift: Any change in BOU’s rate suppression posture, however unlikely before the next MPC meeting, would rapidly close the primary-secondary gap and push cut-offs higher.

Bottom Line

The April 15 auction takes place in an environment defined by active policy management rather than purely market-driven price discovery. BOU has the macro space (low inflation, high real rates) and the institutional willingness to continue guiding yields lower. But the secondary market’s persistence 100–150 basis points above primary levels is a signal that the market is not fully convinced. Our predictions reflect that tension: a controlled drift upward from February’s suppressed levels, but not a full convergence to secondary market pricing — not yet.

This article is based on proprietary analysis using Bank of Uganda auction results, secondary market data, Uganda Bureau of Statistics CPI data, and BOU monetary policy communications. It is intended for informational purposes and does not constitute investment advice.

Sources & References:

• Bank of Uganda holds CBR at 9.75%

• October 2025 Uganda Treasury Bond Auction Results

• Uganda CPI March 2026 | Uganda Bureau of Statistics

• BOU Official Auction Results

Across Uganda’s government securities market between September 2025 and March 2026, secondary market turnover on the day after an auction averaged UGX 823 billion — roughly 51% above the baseline. Two days after? UGX 832.5 billion, a 53% premium. On auction day itself, turnover averaged UGX 357.7 billion, 34% below baseline.

The pattern is consistent enough to be useful. But the more important question isn’t whether it exists — it’s why it exists, and what investors should actually do with it.

Auctions are not liquidity events. They are risk distribution events.

This distinction is easy to miss but critical to get right.

When a government auction closes, the market hasn’t produced liquidity — it has allocated risk. Securities have moved from the government’s balance sheet to the primary market. The secondary market, which was essentially paused while investors committed capital to bids, then has to absorb that allocation. That absorption process — settlement, balance sheet adjustment, portfolio rebalancing — is what drives the post-auction trading surge.

In other words, the D+1 and D+2 liquidity spike is a mechanical consequence of how bond markets work, not a coincidence or a sentiment effect. Once you see it that way, the pattern becomes more predictable and more actionable.

What the numbers show

Period Avg turnover vs. baseline Auction day (D0) UGX 357.7 bn −34% D+1 UGX 823.0 bn +51% D+2 UGX 832.5 bn +53%

Total turnover analysed: UGX 69.16 trillion · Coverage: Sep 2025 – Mar 2026

The 1.5× post-auction premium is the average across the full sample, and it persists across multiple auction cycles. This is not a one-off data artefact driven by a single large block trade — the expansion reflects broad participation across the market.

That said, averages in emerging markets can mislead. The appropriate response isn’t to discard the data, but to read it carefully: the direction of the pattern is robust; the magnitude on any individual day will vary with auction quality, macro conditions, and market structure.

The auction cycle, step by step

Every auction follows the same sequence:

Auction → Securities allocated, clearing yield set

Settlement (D+1) → Cash and bonds transfer; banks and asset managers adjust balance sheets

Rebalancing (D+1 to D+2) → Participants redistribute positions — some dealers were over-allocated, some asset managers were underweight; both sides trade to correct this

Secondary market activation → Turnover expands, price discovery improves, bid-offer spreads typically tighten

The key insight here is that liquidity doesn’t appear when allocation happens. It appears when the consequences of allocation start working their way through the system.

Reading liquidity alongside yield

Turnover data alone tells you when to trade. Yield data tells you what you’re buying.

Post-auction, the secondary market is essentially re-testing the clearing yield set at auction. Two scenarios play out differently:

Strong auction (high bid-to-cover, tight yield) + elevated D+1 turnover → confirmation of genuine demand. Yields tend to stabilise or compress marginally as participants build positions with conviction.

Weak auction (low bid-to-cover, wide yield clearing) + elevated D+1 turnover → a warning signal. High turnover here likely reflects dealers offloading excess allocation into a thin book. Yield pressure may continue into D+2 and beyond.

The post-auction window is a genuine execution opportunity in the first scenario. In the second, it can be a trap. The bid-to-cover ratio is the single best early indicator of which regime you’re in.

A three-phase framework

Rather than thinking about individual days, it helps to think about the auction cycle in three distinct phases:

Phase 1 — Pre-auction (positioning) Speculative activity, uneven liquidity, lower conviction. Not the right moment to establish large positions.

Phase 2 — Auction day (allocation) Risk is being distributed. Secondary activity is structurally constrained. Avoid forcing large trades here — you will pay for it in spread.

Phase 3 — D+1 / D+2 (redistribution) Balance sheets adjust, liquidity expands, price discovery improves. This is the primary execution window.

Most investors do the opposite — they focus attention on auction day and then step back. The data suggests they should do almost the reverse.

Turning this into a decision

A simple signal framework puts the analysis to work:

Increase participation when: bid-to-cover is above average, yield is at or below the previous auction level, and D+1 turnover exceeds the baseline.

Maintain base allocation when: the auction was roughly in line with expectations, but no clear signal from secondary markets yet.

Reduce exposure when: bid-to-cover was weak, yield cleared wide, and D+1 turnover is elevated but price is still moving — suggesting redistribution under stress rather than orderly repositioning.

This converts a market pattern into a repeatable decision process. The inputs are publicly observable; the signal updates at each auction cycle.

When the pattern breaks

The D+1/D+2 liquidity premium is conditional, not guaranteed. Four scenarios weaken or eliminate it:

Weak auction demand. When bid-to-cover is low, there simply isn’t enough redistribution capacity to drive meaningful secondary volume. Or if volume is high, it’s distressed selling — not an opportunity.

Large issuance shocks. Supply that overwhelms demand absorption can extend the pricing uncertainty window well past D+2.

Monetary tightening. System-wide liquidity constraints in the banking system reduce the rebalancing activity that drives the pattern.

Concentrated participation. If a small number of players dominate primary allocation, the redistribution dynamic doesn’t materialise. High turnover numbers can mask very thin actual depth.

Monitoring these four conditions at each auction cycle is the risk management layer around the strategy.

The Impala Market view

Uganda’s bond market operates as a two-stage system. Auctions allocate risk; secondary markets determine final ownership. These are separate functions, separated by time, mechanics, and incentive structures.

Liquidity does not peak at the moment of issuance. It peaks when the market begins to absorb and reprice that issuance — typically 24 to 48 hours later.

Investors who treat auctions as execution events will consistently trade in the thinnest part of the cycle. Investors who treat auctions as price discovery signals — and build positions in the secondary market that follows — have a structural edge.

That edge is real, but it’s conditional. It’s strongest when auction demand is credible, secondary participation is broad, and macroeconomic conditions are stable. Weakest when any of those three conditions breaks down. Tracking all three, at every auction cycle, is the minimum standard for using this framework in practice.

Data: Total turnover analysed UGX 69.16 trillion · Average daily turnover UGX 544.6 billion · Coverage Sep 2025 – Mar 2026

Next steps for this analysis: median turnover by tenor · yield-liquidity interaction dataset · real-time signal tracker

Impala Market publishes insights on African Financial Markets for individual investors, investment clubs, and offshore investors.

Subscribe at blog.impala.market

The Ministry of Finance is projecting a 10.4% GDP growth, fueled by the long-awaited commercialization of the oil sector.

The government has dubbed this the “Tenfold Growth Strategy”, a plan to grow the economy to $500 Billion by 2040.

1. The Macro: The Oil Dream vs. The Fiscal Shrink

The anticipation of First Oil is the primary driver behind the double-digit growth forecast.

Inflation is projected to remain stable at 3.1%, well within the policy target.

However, despite the growth optimism, the actual Resource Envelope (the money the government has to spend) has shrunk.

• FY 25/26 Budget: UGX 72.4 Trillion

• FY 26/27 Budget: UGX 69.4 Trillion

Why the shrink? External budget support (loans and grants from development partners) has been slashed by 84% forcing Uganda to rely on domestic revenue mobilization (taxes) which is targeted to rise by 9% to UGX 40.1 Trillion.

2. The Elephant in the Room: Treasury Operations

To understand government’s priorities, look at their budget allocations.

In FY 2026/27, the single largest allocation goes to Treasury Operations, essentially, debt servicing and redemptions.

• Treasury Operations Allocation: UGX 28.3 Trillion

• Human Capital (Health + Education): ~UGX 9.9 Trillion

The Insight: The government is spending nearly 3x more on managing debt than it is on the health and education of its workforce combined. This effectively crowds out development spending, leaving the state with very little fiscal space to stimulate the economy directly.

3. The “Street” Reality: Business Survival & The Labor Trap

The Parliamentary Budget Committee report (Page 135) drops two statistics that every investor and policymaker needs to internalize.

The 25% Survival Rate

The report notes that Uganda has one of the lowest business survival rates globally. Only one out of four firms remains operational after the first five years.

The government’s strategy relies on “Full Monetization” of the economy, bringing the informal sector into the tax net. But if 75% of businesses die in infancy, the tax base cannot widen fast enough to support the budget. The ecosystem is currently too toxic for small businesses to graduate into medium enterprises.

The Vulnerability Index

While the official unemployment rate has dropped to 8.8%, this number masks a structural crisis.

• 78% of the labor force is engaged in “vulnerable employment” (low pay, no job security, subsistence work).

• The World Bank’s July 2025 review notes that Uganda is “failing to harness 61% of its human capital” for economic development.

4. The Investor Angle: Bond Market Implications

For fixed-income investors, the FY 26/27 framework creates a specific set of opportunities and risks characterized by “High Supply, High Yields.”

• Supply Tsunami (Domestic Reliance): With external budget support cut by 84%, the government has no choice but to turn to the domestic market to bridge the deficit. Expect an aggressive issuance calendar for Treasury Bills and Bonds. The UGX 28.3T allocation for Treasury Operations indicates massive refinancing needs (rolling over old debt).

• Yields Will Remain Sticky: The sheer volume of government borrowing demand will likely keep yields elevated. The government must price its paper attractively to court local banks and offshore investors.

  • The Arbitrage: With inflation projected at a low 3.1% and bond yields historically hovering in the 13-16% range, Uganda offers one of the highest Real Yields (approx. 10%+) in frontier markets.

• The “Crowding Out” Trade: This dynamic creates a “Lazy Banking” incentive. Why would a commercial bank lend to a private sector where 75% of businesses fail (high risk) when they can lend to the government at ~15% (zero risk)? This cements the bond market as the primary profit center for banks, but suffocates private sector credit growth.

The Impala Verdict

Uganda is entering a defining transition period. The 10.4% growth is real, but it is currently ring-fenced around the extractive sector.

The risk is a “two-speed economy”:

1. Speed A: A booming oil & gas sector and a government efficiently collecting taxes to pay off debt.

2. Speed B: A private sector struggling with a high mortality rate and a labor force that is largely under-utilized and vulnerable.

The Outlook: The government is betting that Oil Revenue will arrive just in time to plug the debt hole before the social costs of austerity become unmanageable.

Watch this space: The success of the NDP IV (National Development Plan) will depend not on the 10% growth figure, but on whether that UGX 28.3T debt service bill starts to come down, freeing up cash for the people who actually drive the economy.

See the Full Report of the Committee on Budget on the National Budget Framework Paper for the FY2026/27 - FY2030/31 here.

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“A little bit of agitation gives resources to souls and what makes the species prosper isn’t peace, but freedom.” — Jean-Jacques Rousseau, The Social Contract (1762)

Over the past 12–18 months, Africa’s investment story has again been written by headlines: contested elections, coups, currency devaluations, and sovereign debt restructurings1. From FX adjustments in Nigeria and Egypt, to political transitions across West and Southern Africa, to the long shadow of debt workouts in Ghana and Zambia, the message reaching global markets has been familiar: instability equals risk.

For many allocators, this seems to confirm a simple conclusion that Africa is, once again, “high risk.”

But that conclusion rests on a basic mistake. It treats visible stress as a proxy for danger to capital. It collapses political contestation, macro adjustment, and institutional weakness into a single narrative of risk—and in doing so, misses the only question that really matters to investors:

not how often systems are tested, but how they respond when pressure arrives.

That distinction between noise and resilience is where Africa continues to be most mispriced.

What investors routinely misunderstand is not Africa’s volatility, but its meaning. Noise is treated as danger; calm as safety. Yet across Africa, as in all frontier markets, the link between political agitation and investment outcomes is shaped less by the presence of conflict than by the strength of institutions that absorb it.

Drawing on Machiavelli’s argument in Discourses on Livy that political conflict, when institutionalised, strengthens republics rather than weakens them, this framework distinguishes between volatility that can be priced and risk that cannot. Machiavelli was explicit that social and political tension is not a pathology of free systems, but a source of their resilience, provided it is channelled through laws and institutions rather than suppressed by force.

As he writes:

“Those who condemn the quarrels between the nobles and the plebs seem to me to censure the very things that were the first cause of Rome’s keeping itself free.”

And later:

“For in every republic there are two diverse humors, that of the people and that of the great, and all the laws made in favor of liberty arise from their disunion.”

— Niccolò Machiavelli, Discourses on Livy, Book I, Chapter 4.

For investors, the translation is precise. Conflict processed through institutions produces volatility that markets can price. Conflict that overwhelms institutions produces tail risk that markets cannot. The distinction Machiavelli drew about political freedom is the same distinction modern finance must draw about capital safety.

Risk, measured properly

A persistent error in African investing is the conflation of geopolitical risk with investment risk. While the two are often bundled together in headlines, they describe fundamentally different dimensions of capital safety.

Geopolitical risk captures exposure to macro-shocks: regime survival, armed conflict, diplomatic realignment, and social unrest. It is typically proxied by high-frequency datasets such as the ACLED Conflict Index, geopolitical risk sentiment indicators, or composite measures like the Fragile States Index (FSI). This is the weather of a nation—loud, episodic and highly visible. Because it dominates news flow, it is often overweighted by global allocators, even when its transmission to commercial outcomes is indirect.

Investment risk, by contrast, is narrower and more operational. It concerns commercial legibility: whether contracts are enforced, policies evolve predictably, capital can exit, and disputes are resolved through rules rather than discretion. These dynamics are better captured by structural governance measures such as the World Bank’s Worldwide Governance Indicators (WGI) or the Ibrahim Index of African Governance, which illuminate the plumbing of the economy rather than its headlines.

The distinction matters because the two risks do not always move together.

Africa offers repeated examples of divergence. Some countries are politically noisy yet commercially legible—where contestation is channelled through courts, regulators, and markets. Others appear tranquil on the surface while quietly accumulating tail risk, as discretion replaces rules and exit optionality erodes.

The distinction hinges on a single question: where does pressure go when it emerges?

From philosophy to measurement

To move beyond anecdote, Machiavelli’s observation is translated into a quantitative framework. The analysis maps African countries across two dimensions that determine whether stress becomes a source of renewal or a source of rupture for capital.

Specifically, each country is positioned according to:

Agitation: is defined as the intensity of political, social, and economic stress that tests a state’s institutional capacity—capturing the frequency and severity of shocks rather than their outcomes. We proxy this dimension using the Fragile States Index (FSI) total score, which reflects pressures across security, legitimacy, and social cohesion. The FSI score is rescaled to a 0–100 Agitation Score (AGS), providing a consistent measure of the stress environment in which institutions must operate and capital must be protected.

Institutional absorption: defined as the capacity of a state to absorb political and economic stress through rules rather than discretion thus preserving contract enforcement, policy continuity, and credible dispute resolution when pressure rises. We proxy this capacity using the World Bank’s Worldwide Governance Indicators (WGI), combining three dimensions most directly linked to commercial legibility—Rule of Law, Government Effectiveness, and Regulatory Quality. These scores are averaged and rescaled to a 0–100 Institutional Absorption Score (IAS), providing a transparent measure of a country’s ability to protect capital under stress rather than merely in calm conditions.

Four African investment regimes

To operationalise the distinction between geopolitical noise and investment resilience, we map African countries on a two-dimensional matrix that combines agitation (measured by the Fragile States Index) with institutional absorption (measured by the Worldwide Governance Indicators). The chart below plots each country against these two forces and draws quadrant lines at the median levels of stress and institutional capacity. The result is not a league table of “safe” and “unsafe” markets, but a regime map revealing four distinct environments in which risk behaves differently and capital requires different instruments. These regimes define the strategic logic for equity, duration, and optionality across Africa.

Plot: Machiavellian Investment Matrix for Africa (Part 1)
Scatter plot of all African countries with quadrant lines at median agitation (62.8) and median absorption (42.0).

Map: Machiavellian Investment Matrix for Africa (Part 2)]
A plot of African countries with quadrant lines at median agitation and median absorption.

1) Productive turbulence:

High agitation, high institutional absorption.

These are Africa’s most misunderstood markets. Political contestation is visible and frequent, but it is channelled through courts, regulators, elections, and public debate.

Countries in this category, per 2023 data, include Kenya, Ivory Coast and Equatorial Guinea.

For investors, volatility raises pricing error rather than confiscation risk. Capital markets function; exits exist. These environments support public equities, financial infrastructure, scalable platforms, and infrastructure with arbitration frameworks.

Duration tolerance is highest here. Risk is not eliminated but it is compensated.

2) Quiet accumulation

Low agitation, high institutional absorption.

This quadrant is defined by administrative competence and limited contestation. Decision-making is centralised; execution is efficient.

Countries in this category, per 2023 data, include Mauritius, Botswana and Ghana.

These markets favour manufacturing, logistics, export platforms, and policy-aligned real assets. Medium-duration capital performs well. The principal risk is political transition: succession events can reprice assets abruptly precisely because volatility has been suppressed rather than expressed.

3) Stagnant stability

Low agitation, low institutional absorption.

Here, apparent calm conceals weak adaptive capacity. Institutions are slow-moving; discretion substitutes for contestation.

Countries in this category, per 2023 data, include Gabon, Sierra Leone and Madagascar, reward caution. Regulatory drift and informal risk favour short-duration exposure.

Private credit, trade finance, and yield-backed assets dominate. Long-duration equity quietly underperforms, not through crisis but through erosion.

4) Destructive turbulence

High agitation, low institutional absorption.

This is where conflict overwhelms institutions. Rules are suspended rather than tested.

Countries in this category, per 2023 data, include Sudan, South Sudan and Somalia, and parts of the Sahel cluster here.

Investment is possible only through risk transfer: sovereign guarantees, development-finance overlays, or option-like exposure. Balance-sheet capital is structurally misaligned.

Ranking Africa: investability, not optimism

Using the combined FSI–WGI framework, countries can be ranked by a simple but powerful investability score that captures not how often systems are stressed, but how well they absorb that stress when it arrives. The score integrates two forces that investors routinely conflate: agitation, measured by the Fragile States Index, and institutional absorption, measured by the Worldwide Governance Indicators.

In practical terms, this means countries with strong institutions retain high investability even in noisy environments, while those with weak institutions see investability collapse as agitation rises.

By penalising fragility while rewarding rule-based capacity, the resulting ranking distinguishes markets where volatility is merely noisy from those where it becomes destructive to capital. In effect, the investability score does not ask which countries are calmest; it asks which countries remain commercially legible under pressure—and therefore which can sustain equity exposure, duration risk, and long-term capital with confidence.

We scale institutional adoption via and Institution Absorption Score (IAS) into 0–100, then combine it multiplicatively with the agitation penalty via an Agitation Score (AGS):

Investability Index = 100×(IAS/100)×(1−AGS)

Interpretation:

• High IAS lifts investability.

• High AGS reduces investability.

• Countries can remain investable even with agitation if absorption is high.

The Investability Index reveals a distribution across African markets in 2023. The median score of 15.59 forms a natural dividing line between countries where institutions still provide a baseline of capital protection and those where fragility overwhelms absorption capacity. Above the median sit markets where volatility is visible but rules continue to hold; below it lie systems where surface calm can conceal deep structural tail risk. Crucially, the highest-ranked countries are not those with the least noise, but those whose institutions remain strongest relative to the stress they face. This pattern shows that Africa does not face a single “risk problem,” but a deep divide in investability, and it is this divide, not headlines, that should guide long-term capital allocation.

The Africa mispricing

Africa’s capital markets are not uniformly risky. They are unevenly understood.

Global investors too often mistake quiet for safety and noise for danger. Yet history shows the opposite is often true. Systems grow stronger not by suppressing conflict, but by absorbing it through institutions.

For investors, the lesson is direct. Returns accrue where rules hold under pressure: where markets can fail, adjust and recover without breaking.

Across Africa, the most investable markets are rarely the calmest. They are the ones where stress strengthens institutions instead of exposing their absence.

That is why, in Africa more than most places, risk, measured properly, is not a hazard. It is a privilege.

While nations like Uganda are successfully de-leveraging through the strategic anticipation of “First Oil” in mid-2026, others, most notably Kenya, are utilizing aggressive fiscal consolidation, anchored by a decisive 4.9%-of-GDP deficit target, to defend their status as regional financial hubs. For the fixed-income investor, the primary challenge is no longer just identifying risk, but accurately timing the monetary divergence between a stabilising Shilling in the East and resource-driven “alpha” in the Albertine Rift.

🌏 The 2025 EAC Sovereign Scorecard

Macro-Fiscal Outlook

🔍 Analysis: The Three Tiers of EAC Debt

1. The “Stability & Scale” Tier (Kenya & Tanzania)

• Kenya: The regional financial heavyweight. After a volatile 2024, Kenya enters late 2025 with a “consolidation win.” Inflation has cooled to ~4.5%, allowing the Central Bank of Kenya (CBK) to maintain its easing cycle. Debt-to-GDP is stabilizing near 69% as the government prioritizes local currency borrowing to mitigate exchange rate shocks.

• Tanzania: Widely considered the most stable “safe haven” in the region. With the lowest debt-to-GDP among major EAC economies (~46%) and massive investments in the Standard Gauge Railway (SGR) and hydropower, Tanzania is leveraging its fiscal space to become the region’s logistics heart.

2. The “Resource & Growth” Tier (Uganda & Rwanda)

• Uganda: 2025 is the “Eve of Oil.” Markets are pricing in a massive revenue jump for 2026 as crude output nears. While domestic debt grew in 2024, the outlook is bolstered by expected USD inflows from the EACOP pipeline. S&P recently upgraded Uganda’s outlook to Positive.

• Rwanda: Despite a high debt ratio (67%), Rwanda remains a darling for concessional lenders. Its growth (7.5%) is the fastest in the region, driven by the service sector and professionalized agriculture. Its debt is “expensive” in volume but “cheap” in interest due to the high share of multilateral loans.

3. The “Frontier & Fragile” Tier (DRC, Burundi, South Sudan)

• DRC: An anomaly with low debt but high risk. The 26% debt-to-GDP reflects limited market access rather than fiscal discipline. Investors here focus on mining-backed credit and private equity rather than sovereign bonds.

• Burundi & South Sudan: Both face severe FX shortages and hyper-inflationary pressures. They remain heavily reliant on commodity prices and, in Burundi’s case, slow donor re-engagement.

📈 The Real Yield Heatmap

For fixed-income investors, the critical metric isn’t the coupon rate, but the Real Yield, the return you keep after accounting for inflation. In 2025, the region offers some of the most compelling real yields in the frontier market space.

Uganda: The “Yield Darling” of the EAC

While Kenya often dominates regional headlines, Uganda is currently delivering the East African Community’s most compelling risk-adjusted real return. As of late 2025, the investment case has shifted from a high-yield carry trade to a structural de-leveraging play ahead of “First Oil” in mid-2026. With inflation anchored at 3.4% and the policy rate held at 9.75%, investors are netting a remarkable +6.35% real yield, supported by foreign exchange reserves that hit an all-time high of USD 5.4 billion in late 2025. To curb the debt-service burden, which now consumes nearly a third of domestic revenue, the Ministry of Finance has announced a decisive 21.1% cut in domestic debt issuance for the FY2026/27 cycle. This supply-side squeeze, combined with S&P’s recent shift to a Positive Outlook, positions Ugandan local bonds as a premier “alpha” opportunity for investors looking to front-run a projected 10.4% GDP surge in 2027.

Kenya: The “Soft Landing” Hub

Kenya enters 2026 as the EAC’s leader in monetary consistency, having transitioned from the “maturity cliff” fears of 2024 to a sustained period of growth support. By delivering its ninth consecutive rate cut in December 2025, bringing the policy rate down to 9.0%, the Central Bank of Kenya (CBK) has successfully anchored inflation at 4.5% and stabilized the Shilling below the 130.00 mark. While public debt remains elevated at ~68.8% of GDP, record foreign exchange reserves of $12.1 billion and a successful pivot toward domestic “Switch Auctions” have significantly lowered refinancing risks. For investors, Kenya represents a +4.50% Real Yield and a prime duration play, offering deep liquidity and the potential for significant capital gains as benchmark bond yields continue their downward “bull flattening” trajectory.

DRC: The Resource-Rich Paradox

The Democratic Republic of the Congo (DRC) is the EAC’s most distinct credit profile, an “under-leveraged” economy where a low debt-to-GDP ratio of ~26.0% masks high structural fragility. Entering 2026, the DRC is a play on aggressive disinflation. Under strict IMF-backed discipline, the Central Bank has crashed inflation from over 20% to just 2.2% as of late 2025. While this creates a staggering theoretical spread against the 17.5% policy rate, the “Real Yield” for investors is a more modest +3.0% once adjusted for chronic currency volatility and the lack of secondary market liquidity. While copper and cobalt exports provide a robust fiscal anchor, investors must navigate persistent security overruns in the East and a “predatory” tax system that keeps the DRC a Tier-3 sovereign destination for all but the most risk-hardened capital.

Rwanda: The High-Growth Leveraged Play

Rwanda remains the EAC’s growth champion, with GDP expanding by a staggering 11.8% in Q3 2025, yet this momentum is tightly coupled with rising leverage. While the public debt-to-GDP ratio has climbed toward 73.2% (projected to peak near 80% by 2027), the risk of distress remains “Moderate” because two-thirds of its debt is concessional. This favorable structure shields Rwanda from the high interest burdens seen in Kenya, allowing it to fund “Mega-Projects” like the New Kigali International Airport and RwandAir expansion. For investors, Rwanda offers a balanced +2.40% Real Yield; it is a “Strategic Hold” that prizes world-class governance and infrastructure-led growth over the high-octane carry trades of its neighbors.

Tanzania: The Safe Haven Under Pressure

Tanzania enters 2026 as the EAC’s leading macroeconomic anchor, maintaining a debt-to-GDP ratio of 46.3%, the only major regional economy under the 50% threshold. However, its “Safe Haven” status is transitioning from a passive guarantee to a strategic watch. Following the contested October 2025 elections, the “Legitimacy Discount” has arrived: Western donors, led by the European Union, have begun suspending aid packages (projected 20% ODA contraction), forcing a costly pivot toward non-concessional commercial debt and domestic borrowing. While the +2.35% Real Yield remains a stable “cash proxy,” investors must now weigh the country’s robust infrastructure-led growth against rising political risk and the potential for a 1–2% drag on GDP if diplomatic isolation persists.

Burundi and South Sudan: The Fragile Frontier

Burundi and South Sudan currently represent the most distressed credit profiles in the EAC, where hyperinflation and severe currency instability have rendered traditional “Real Yield” metrics a measure of capital destruction. Burundi is trapped in a negative real-interest spiral (approx. -25.30%), exacerbated by the January 2025 termination of its IMF program and a chronic FX shortage that limits import cover to just 1.6 months. Meanwhile, South Sudan is navigating an existential fiscal crisis following a massive 30% GDP contraction in FY25 due to oil pipeline shutdowns in Sudan. While oil exports resumed in late 2025, the economy remains crippled by triple-digit inflation and a USD 2.3 billion oil-backed debt wall. For investors, these markets remain “observational” only; until exchange rates are unified and commercial arrears cleared, they serve primarily as a cautionary backdrop to the more liquid hubs of Kenya and Uganda.

⚠️ Regional Risk Watch: 2026 Outlook

• Monetary Divergence: While Kenya and Tanzania ease, the DRC and South Sudan remain in high-interest environments to combat structural inflation.

• Refinancing “The Wall”: Kenya and Rwanda face significant commercial debt maturities in 2026. Their ability to tap international markets at sub-10% coupons will be the litmus test for regional sentiment.

• Currency Stability: The Kenyan Shilling has remained steady at the 128-130 range, acting as a “stability anchor” for regional trade.

The Impala Market Strategy for 2026

For fixed-income investors, the EAC in 2026 is defined by a “monetary decoupling.” impacted by key fiscal calendar events.

Read more

• Total Public Debt: UGX 116.2 trillion (~USD 32.3 billion) as of June 2025.

• Debt-to-GDP Ratio: 51.3% (surpassing the 50% threshold, though lower in present value terms).

• Debt Composition: ~52% Domestic | ~48% External.

• Outlook: Uganda is at a fiscal crossroads. While debt levels have surged due to infrastructure spending, the start of oil production (projected late 2026) and a resumption of World Bank funding offer a path to de-leveraging. The immediate concern is the rising cost of domestic debt servicing.

🔍 1. Debt Market Structure

1.1 Total Public Debt Profile

• Domestic Debt: UGX 60.3 trillion (A sharp 49% YoY increase).

• External Debt: UGX 55.9 trillion (~USD 15.5 billion).

• Debt Service-to-Revenue Ratio: ~25%–32%. For every UGX 100 collected in tax, nearly UGX 30 now goes to interest and principal repayments.

• Source: Ministry of Finance, Planning and Economic Development (MoFPED) 2025 Reports.

1.2 Legal & Institutional Framework

• Governance: The Directorate of Debt and Cash Policy under MoFPED.

• Monetary Authority: The Bank of Uganda (BoU) manages the issuance of government securities.

• Strategic Shift: The government has signaled a move to reduce external commercial borrowing in 2025/26 to mitigate FX risks and manage the “debt pile.”

🏦 2. Domestic Debt Instruments

InstrumentCurrencyMaturityFrequency2025 Yield TrendsTreasury BillsUGX91, 182, 364 daysBi-weeklyDownward: 364-day yields dropped toward ~12.5% from 2024 peaks.Treasury BondsUGX2, 3, 5, 10, 15, 20 yearsMonthlyStable: Long-term yields (15–20 yrs) remain attractive at ~15%–16%.

• Retail Access: Unlike Kenya’s DhowCSD, Uganda’s retail participation is growing but remains bank-heavy. However, the BoU has improved the Central Securities Depository (CSD) to facilitate easier secondary market transfers.

• Primary Dealer System: A limited number of commercial banks act as Primary Dealers, providing liquidity to the secondary market.

🌍 3. External Sovereign Debt

• Multilateral (66%): The backbone of external debt. The World Bank (IDA) is the largest creditor (USD 5.3B), followed by the AfDB and IMF.

• Bilateral (23%): Dominated by the Exim Bank of China (70% of bilateral debt), primarily funding the Entebbe Express Highway and Karuma/Isimba hydropower projects.

• Commercial (11%): Standard Bank and AFREXIM are the primary commercial lenders. Uganda has historically avoided Eurobonds, preferring concessional or semi-concessional debt.

👥 4. Investor Base

• Domestic: Dominated by Commercial Banks and the National Social Security Fund (NSSF). The NSSF is a massive player, often acting as a price setter for long-term bonds.

• Foreign Investors: Interest is cautiously returning as the Shilling (UGX) shows resilience and FX reserves hit an all-time high of USD 5.4 billion in late 2025.

📊 5. Recent Trends & 2025 Outlook

• The “Domestic Tilt”: In 2024/25, domestic borrowing grew by over 50% while external borrowing grew by only 6%. This was a deliberate move to reduce foreign currency exposure but has “crowded out” private sector lending.

• The Oil Factor: Economic growth is projected to jump from 6% to over 7.5% in 2026/27 as oil exports via the EACOP pipeline begin. This is the primary “bull case” for Uganda’s debt sustainability.

• Resumption of Aid: The World Bank’s October 2025 decision to resume project lending (after a pause over the Anti-Homosexuality Act) has injected fresh liquidity into the infrastructure budget.

⚠️ 6. Risk Assessment

• Refinancing Risk: Domestic debt is increasingly skewed toward short-term maturities, requiring constant “roll-overs.”

• Concentration Risk: Heavy reliance on the banking sector and NSSF to absorb local debt.

• Political Risk: The upcoming January 2026 General Election may introduce fiscal slippage as government spending typically increases during election cycles.

✅ 7. Opportunities & Reforms

• Deepen the Bond Market: Moving beyond the current primary dealer system to a more automated, retail-friendly secondary market.

• ESG & Oil: Balancing the environmental concerns of oil production with the potential for Green Bonds to fund renewable energy and reforestation.

• Capital Market Integration: Harmonizing bond settlement systems within the East African Community (EAC) to allow cross-border trading.

📎 8. Annexes & Ratings

Current Credit Ratings (Updated Q4 2025):

• S&P: B- (Positive) — Outlook revised from Stable in Nov 2025 due to oil prospects.

• Moody’s: B3 (Stable).

• Fitch: B- (Stable).

Resources:

• Bank of Uganda - Securities Auctions

• Uganda Ministry of Finance - Debt Reports

📬 For Investors & Researchers

Uganda presents a “yield-play” opportunity. While debt levels have crossed the 50% mark, the impending oil revenue windfall acts as a significant safety net. The current high domestic yields offer a window of opportunity before the expected rate easing in 2026.

Published by Impala Market

📌 Executive Snapshot

• Total Public Debt: BIF 6.2 trillion (~USD 2.1 billion)

• Debt-to-GDP Ratio: ~66%

• Debt Composition: ~84% domestic, ~16% external

• Outlook: Burundi’s debt portfolio is heavily skewed toward domestic borrowing, with limited access to international markets. Structural reforms are underway to strengthen fiscal management and improve market transparency.

🔍 1. Debt Market Structure

1.1 Total Public Debt Profile

• Domestic Debt: BIF 5.2 trillion

• External Debt: BIF 1.0 trillion

• Debt Service-to-Revenue Ratio: ~45–50%

• Source: Ministry of Finance – Burundi

1.2 Legal & Institutional Framework

• Debt managed by the Ministry of Finance, Budget, and Economic Planning

• Central Bank of Burundi (BRB) handles auctions and settlement

• Public debt governed by the Organic Law on Public Finance Management (2020)

🏦 2. Domestic Debt Instruments

Instrument Currency Maturity Frequency Notes Treasury Bills BIF 13, 26, 52 weeks Weekly Discount instruments Treasury Bonds BIF 2–7 years Periodic Fixed coupon, limited issuance

• Domestic debt largely non-tradable beyond primary auction

• Held mainly by state-owned banks and the BRB

🌍 3. External Sovereign Debt

• Multilateral: World Bank (IDA), IMF, AfDB

• Bilateral: China, Saudi Arabia, Kuwait

• No Eurobond or international market participation

• External debt is largely concessional

👥 4. Investor Base

Domestic:

• State-owned banks and the Central Bank of Burundi

• Pension funds and insurance companies (limited)

Foreign:

• Practically no foreign participation in the domestic debt market

• Foreign aid flows and concessional loans dominate external funding

🔁 5. Secondary and OTC Market

• Very limited secondary market activity

• No dedicated bond exchange or trading platform

• Instruments are held to maturity; pricing information is not public

📊 6. Recent Trends

• Short-term T-Bill issuance dominant

• Rising domestic interest rates due to inflation and monetary tightening

• Ongoing fiscal consolidation under IMF-supported programs

• Introduction of digital payment systems for government operations

⚠️ 7. Risk Assessment

• Debt Sustainability: Moderate-to-high risk (IMF DSA 2023)

• Liquidity Risk: High due to narrow investor base

• Market Risk: Lack of transparency and market depth

✅ 8. Opportunities & Reforms

• Introduce regular reporting and publication of debt statistics

• Explore development of a retail bond market

• Deepen market access through banking sector reforms

• Strengthen coordination between BRB and MoF on public finance strategy

📎 9. Annexes

• Ministry of Finance Burundi

• Central Bank of Burundi

• Credit Ratings: Not rated by international agencies as of 2025

📬 For Investors & Researchers

Burundi remains a shallow but evolving debt market. While investor access is constrained, ongoing macroeconomic and governance reforms may unlock future opportunities in debt transparency, concessional finance, and digital innovation.

👉 Follow Impala Market for East Africa debt coverage.

📩 Contact: impala@marketresearch.africa

Published by Impala Market

📌 Executive Snapshot

• Total Public Debt: CDF 25.6 trillion (~USD 10.1 billion)

• Debt-to-GDP Ratio: ~16.5%

• Debt Composition: ~75% external, ~25% domestic

• Outlook: DRC maintains one of the lowest debt-to-GDP ratios in Africa, with external concessional loans dominating the portfolio. The local debt market remains underdeveloped but is gaining attention as reforms take hold.

🔍 1. Debt Market Structure

1.1 Total Public Debt Profile

• External Debt: CDF 19.2 trillion

• Domestic Debt: CDF 6.4 trillion

• Debt Service-to-Revenue Ratio: ~12–15%

• Source: Ministry of Finance DRC

1.2 Legal & Institutional Framework

• Debt managed by the Direction Générale de la Dette Publique (DGDP) under the Ministry of Finance

• The Central Bank of Congo (BCC) supports issuance and reporting

• Legal foundation guided by the Public Debt Management Law (2020)

🏦 2. Domestic Debt Instruments

Instrument Currency Maturity Frequency Notes Treasury Bills CDF 28, 91, 182 days Weekly Discounted, limited liquidity Treasury Bonds CDF 1–5 years Occasional Fixed coupon, irregular issuance

• Instruments primarily held by local banks and the BCC

• No retail bond participation yet

🌍 3. External Sovereign Debt

• Multilateral: IMF, World Bank (IDA), AfDB

• Bilateral: China, Belgium, France

• Eurobonds: None issued

• External debt remains highly concessional and focused on infrastructure, energy, and governance reforms

👥 4. Investor Base

Domestic:

• State-owned and private banks

• Central Bank of Congo (major holder)

Foreign:

• Limited to multilateral/bilateral debt holders

• No foreign participation in local debt markets due to capital controls and market opacity

🔁 5. Secondary and OTC Market

• Virtually no secondary trading

• No dedicated bond exchange

• Instruments typically held to maturity

• Lack of yield curve or regular pricing data

📊 6. Recent Trends

• Short-term T-Bills remain the dominant financing tool

• Efforts underway to introduce longer-term bonds

• IMF-backed structural reform program (2021–2025) continues

• Low inflation and fiscal consolidation improving macro stability

⚠️ 7. Risk Assessment

• Debt Sustainability: Low risk (IMF DSA 2024), aided by concessional terms

• Liquidity Risk: High due to shallow domestic markets

• FX and Transparency Risk: Elevated due to currency volatility and limited public reporting

✅ 8. Opportunities & Reforms

• Publish regular debt statistics and auction calendars

• Develop local bond market via gradual issuance and benchmark building

• Introduce digital bond platforms to reach new investor segments

• Build capacity in public debt and macro-financial management

📎 9. Annexes

• Ministry of Finance – DRC

• Central Bank of Congo

• Credit Ratings:

  • Moody’s: Not Rated

  • S&P: Not Rated

  • Fitch: Not Rated

📬 For Investors & Researchers

DRC’s sovereign debt profile is defined by low external indebtedness and a narrow domestic market. Structural reform momentum, macroeconomic stability, and international support provide a basis for gradual debt market development.

👉 Subscribe to Impala Market for more insights on African sovereign debt.

📩 Contact: impala@marketresearch.africa

Published by Impala Market

📌 Executive Snapshot

• Total Public Debt: SSP 1.45 trillion (~USD 1.2 billion)

• Debt-to-GDP Ratio: ~40–45%

• Debt Composition: >90% external, <10% domestic

• Outlook: South Sudan’s debt market remains nascent and highly dependent on external concessional financing. Institutional reforms and oil-backed borrowing characterize the current sovereign debt landscape.

🔍 1. Debt Market Structure

1.1 Total Public Debt Profile

• External Debt: SSP 1.32 trillion

• Domestic Debt: SSP 130 billion

• Debt Service-to-Revenue Ratio: ~35–45%

• Source: Ministry of Finance and Planning – South Sudan (where available), IMF country reports

1.2 Legal & Institutional Framework

• Debt managed by the Ministry of Finance and Planning

• Central Bank of South Sudan (BoSS) involved in monetary policy and fiscal reporting

• Debt management guided by provisional legislation under the Public Finance Management and Accountability Act (PFMAA)

🏦 2. Domestic Debt Instruments

Instrument Currency Maturity Frequency Notes Treasury Bills SSP 91, 182 days Occasional Issued through auctions Treasury Bonds SSP 1–3 years Rare Ad hoc, limited investor base

• Domestic market mostly supported by state-owned banks and BoSS

• Private participation and secondary trading are virtually absent

🌍 3. External Sovereign Debt

• Multilateral: IMF, World Bank (IDA), AfDB

• Bilateral: China, Qatar, regional lenders

• Oil-backed loans: Significant portion of external liabilities

• External debt is largely concessional but opaque

👥 4. Investor Base

Domestic:

• Public commercial banks

• Central Bank of South Sudan

• No institutional investor base (e.g., pension funds) due to underdeveloped financial sector

Foreign:

• Bilateral and multilateral creditors dominate

• No foreign investor participation in domestic market

🔁 5. Secondary and OTC Market

• No formal bond market or trading infrastructure

• Debt held to maturity by BoSS and banks

• Pricing and yield data are not published regularly

📊 6. Recent Trends

• Treasury Bills occasionally used for short-term liquidity management

• IMF Extended Credit Facility (ECF) supports macroeconomic stabilization

• Efforts ongoing to improve debt recording and public financial management

• Inflation and FX volatility remain key macro constraints

⚠️ 7. Risk Assessment

• Sustainability: High risk of debt distress (IMF DSA 2023)

• FX Risk: High – with oil revenues in USD but local obligations in SSP

• Liquidity Risk: Severe due to shallow banking sector

✅ 8. Opportunities & Reforms

• Strengthen debt transparency and regular publication of statistics

• Build foundational legislation for domestic market development

• Explore diaspora bonds or regional bond market access in the long term

• Digitize budget and debt reporting to improve investor confidence

📎 9. Annexes

• Ministry of Finance and Planning – South Sudan

• Bank of South Sudan

• Credit Ratings: Not rated by Moody’s, S&P, or Fitch

📬 For Investors & Researchers

South Sudan presents a fragile but strategically important debt context in East Africa. While market entry is premature for most investors, reforms supported by international institutions may gradually open avenues for engagement in the coming years.

👉 Subscribe to Impala Market for frontier market insights.

📩 Contact: impala@marketresearch.africa

• Total Public Debt: KES 12.06 trillion (~USD 93.3 billion) as of Q3 2025.

• Debt-to-GDP Ratio: ~67.3% (trending down from 73% in 2023 but remaining above the 50% IMF threshold).

• Debt Composition: ~55% Domestic | ~45% External.

• Outlook: Kenya’s debt profile has stabilized following a successful 2024 Eurobond buyback and currency appreciation. However, the pivot to domestic borrowing—while reducing FX risk—has kept the interest burden high even as yields begin to moderate from 2024 peaks.

🔍 1. Debt Market Structure

1.1 Total Public Debt Profile

• Domestic Debt: KES 6.66 trillion

• External Debt: KES 5.39 trillion

• Interest-to-Revenue Ratio: ~30–35% (World Bank, 2025). While the “Debt Service” ratio is higher, interest payments alone now consume a significant portion of tax revenue.

• Source: National Treasury Quarterly Debt Reports & CBK Weekly Bulletins.

1.2 Legal & Institutional Framework

• Governance: Managed by the Public Debt Management Office (PDMO) within the National Treasury.

• Execution: The Central Bank of Kenya (CBK) acts as the fiscal agent for domestic auctions.

• Regulatory Basis: Public Finance Management (PFM) Act, 2012, which mandates transparency and sets borrowing guidelines.

🏦 2. Domestic Debt Instruments

InstrumentCurrencyMaturityFrequency2025 Yield TrendsTreasury BillsKES91, 182, 364 daysWeeklyDown: 91-day paper fell from ~16% to ~7.9% in late 2025.Treasury BondsKES2–30 yearsMonthlyModerating: 10-year benchmark yields have cooled to ~12.7%–13%.Infrastructure Bonds (IFB)KES5–25 yearsPeriodicHigh Demand: Remain the “darling” of the market due to tax-exempt status.

• Retail Revolution: The DhowCSD mobile platform has fundamentally changed the market, allowing Kenyans in the diaspora and at home to invest with as little as KES 50,000.

• Liability Management: The CBK is increasingly using Switch Auctions to convert short-term T-bills into longer-term bonds to manage the “maturity wall.”

🌍 3. External Sovereign Debt

• Multilateral (56.7%): Now the largest share of external debt, led by the IMF and World Bank. This reflects a shift toward concessional, cheaper funding.

• Eurobonds (Commercial): Kenya successfully navigated the February 2024 “maturity cliff.” Currently, USD-denominated Eurobonds are trading with improved sentiment compared to 2023.

• Bilateral (18.5%): China remains the largest bilateral lender, though the share is shrinking as Kenya prioritizes multilateral funding.

👥 4. Investor Base

• Domestic (Tier 1): Commercial Banks (the largest holders), Pension Funds (NSSF), and Insurance firms.

• Retail Growth: Individual investors now represent a growing share of the domestic market via DhowCSD.

• Foreign Investors: Becoming more active in local currency bonds again in 2025 as the Shilling stabilized and inflation dropped to ~4.5%.

🔁 5. Secondary and OTC Market

• Venue: Listed bonds trade on the Nairobi Securities Exchange (NSE).

• Liquidity: Most trading occurs Over-the-Counter (OTC) between banks but is settled via the CBK’s Central Depository System.

• Innovation: Introduction of the Global Master Repurchase Agreement (GMRA) is expected to deepen the horizontal repo market (interbank lending using bonds as collateral).

📊 6. Recent Trends & 2025 Outlook

• Yield Curve Normalization: The “inverted” yield curve of 2024 has begun to flatten as short-term rates drop faster than long-term rates.

• Green Finance: The National Treasury is finalizing the Sovereign Green Bond Framework for a potential 2026 issuance.

• Fiscal Consolidation: The 2025/26 budget focuses on aggressive revenue mobilization to narrow the deficit to below 4.0% of GDP.

⚠️ 7. Risk Assessment

• Sustainability: IMF DSA (2024/25) maintains a “High Risk” rating, primarily due to high interest costs rather than total volume.

• Revenue Risk: While debt is stabilizing, missed tax collection targets remain the biggest threat to the “fiscal consolidation” narrative.

• Global Rates: If the US Fed holds rates “higher for longer,” it limits Kenya’s ability to return to international markets for cheap refinancing.

✅ 8. Strategic Opportunities

• Local Currency Bias: Reducing exposure to USD-denominated debt to insulate the budget from Shilling volatility.

• NSE Liquidity: Continued reforms to move more OTC trading onto the NSE platform to improve price discovery.

• ESG Integration: Attracting “impact” capital through ESG-linked debt instruments.

📎 9. Annexes & Ratings

Current Credit Ratings (Updated Q4 2025):

• S&P: B (Stable) — Upgraded from B- in mid-2025.

• Moody’s: Caa1 (Positive) — Outlook improved in early 2025.

• Fitch: B- (Stable).

Resources:

• Central Bank of Kenya - DhowCSD Portal

• National Treasury - Debt Management Office

• Nairobi Securities Exchange - Bond Prices

📬 For Investors & Researchers

Kenya’s debt market has moved from a state of “crisis management” in 2023 to “strategic consolidation” in 2025. For the fixed-income investor, the falling yield environment offers potential for capital gains on existing long-term holdings.

Published by Impala Market

📌 Executive Snapshot

• Total Public Debt: TZS 89.4 trillion (~USD 35.2 billion)

• Debt-to-GDP Ratio: ~41%

• Debt Composition: ~71% domestic, ~29% external

• Outlook: The government continues to rely on local borrowing to finance infrastructure and social programs, while maintaining moderate external debt exposure. A stable macro environment supports investor confidence.

🔍 1. Debt Market Structure

1.1 Total Public Debt Profile

• Domestic Debt: TZS 63.4 trillion

• External Debt: TZS 26 trillion

• Debt Service-to-Revenue Ratio: ~30–35%

• Source: Ministry of Finance – Debt Statistics

1.2 Legal & Institutional Framework

• Debt managed by the Ministry of Finance and Planning (MoFP)

• Central Bank of Tanzania (BoT) conducts auctions and debt servicing

• Legal framework guided by the Loans, Grants and Guarantees Act, 1974 (as amended)

🏦 2. Domestic Debt Instruments

Instrument Currency Maturity Frequency Notes Treasury Bills TZS 35, 91, 182, 364 days Weekly Discount instruments Treasury Bonds TZS 2–20 years Monthly Fixed coupon, biannual interest

• Retail access through licensed brokers and banks

• Institutional demand dominated by pension funds and banks

🌍 3. External Sovereign Debt

• Multilateral: World Bank (IDA), IMF, AfDB

• Bilateral: China, Japan, France

• No active Eurobond issuance as of 2025

• Participation in concessional and semi-concessional programs continues

👥 4. Investor Base

Domestic:

• Pension funds (e.g., NSSF, PSSSF)

• Commercial banks

• Insurance companies

Foreign:

• Limited access to domestic debt market

• FX risk and capital controls deter foreign portfolio inflows

🔁 5. Secondary and OTC Market

• Treasury instruments traded primarily over-the-counter (OTC)

• No dedicated bond exchange

• Central Depository at BoT manages settlement and registration

• Market yields published via BoT and primary dealers

📊 6. Recent Trends

• Treasury bond yields range between 10% and 15%, depending on tenor

• Increased issuance of long-term bonds to manage refinancing risks

• Stable inflation and shilling performance support real returns

• New issuance calendar improving predictability for institutional investors

7. Risk Assessment

• Sustainability: Low to moderate risk of debt distress (IMF DSA 2024)

• FX Risk: Moderate – managed through prioritization of concessional financing

• Liquidity Risk: Concentrated investor base limits secondary market activity

✅ 8. Opportunities & Reforms

• Develop a sovereign bond index for transparency and benchmarking

• Broaden investor base through digital access and mobile savings bonds

• Introduce green bonds for infrastructure and climate-related investments

• Improve pricing transparency via dedicated market data platforms

📎 9. Annexes

• BoT Treasury Auction Calendar

• MoFP Debt Reports

• Credit Ratings:

  • Moody’s: Not Rated

  • S&P: Not Rated

  • Local agencies: TCRA assessments for internal risk grading

📬 For Investors & Researchers

Tanzania offers relatively stable macro conditions, moderate debt risk, and consistent access to domestic financing. Opportunities lie in expanding financial inclusion, modernizing infrastructure through sustainable financing, and gradually opening to foreign investors.

👉 Subscribe to Impala Market for weekly market intelligence. 📩 Contact: impala@marketresearch.africa

“I want to start... what do I actually need to do?”

So far, we have covered what money market funds are, how they work, and why they’re safe. But one of the most common questions we get is:

"How do I actually open an account and start earning interest?"

This guide walks you through the full process — step-by-step — with tips on how to track your investment and stay in control.

Step 1: Choose a CMA-Licensed Fund Manager

Start by selecting a licensed fund manager or collective investment scheme.

You can check the official list of licensed Unit Trust managers on the Capital Markets Authority (CMA) Uganda website.

Some of the leading fund managers include:

• Xeno Investment Management

• ICEA Lion Asset Management

• UAP Old Mutual

• Sanlam Investments

• Britam Asset Managers

• SBG Securities

Don’t go through random agents. Use official websites, bank branches, or licensed mobile apps.

Step 2: Submit Account Opening Requirements

To open a MMF account, you’ll typically need:

• National ID / Passport Clear copy (front and back)

• Passport-size photo Some allow digital uploads

• Bank details For withdrawals or fund transfers

• Email address For receiving statements and reports

• Phone number Often linked for SMS or mobile money access

• KYC form Standard "Know Your Customer" form

• Initial deposit Usually UGX 100,000 (some accept UGX 10,000)

Some platforms allow full digital onboarding via mobile apps or web forms.

Step 3: Fund Your Account

You can deposit money into your MMF account via:

• Bank transfer

• Mobile money (MTN/Airtel Pay)

• Standing orders for automatic saving

Pro tip: Automate monthly deposits to stay consistent and benefit from compounding.

Step 4: Track Your Earnings and Activity

Once your account is active:

• You’ll receive monthly statements showing how much interest you earned, any fees charged, and your balance.

• Some fund managers allow daily tracking via dashboards or apps.

Always read your statements. It’s how you know whether your fund is doing well.

Step 5: Withdraw or Reinvest

You can:

• Withdraw funds at any time (usually takes 1–3 business days)

• Reinvest to keep compounding interest

• Split funds — e.g., withdraw half, leave the rest to grow

Important: Funds are not meant for day-to-day spending. Use them as savings or short-term investment tools.

Quick Summary: 5-Step Onboarding Checklist

1. Pick a CMA-licensed MMF

2. Submit ID, photo, bank info, and KYC

3. Deposit your first amount

4. Track statements monthly

5. Withdraw anytime or reinvest

Tools to Help You

• MMF Tracker Spreadsheet: log deposits, interest earned, and withdrawals

• Investment Policy Worksheet: define your goals (emergency, school fees, business capital)

• Set reminders: monthly top-up or quarterly review

📬 Next in the Series:

“How to Read a Money Market Fund Statement”
Understand what every number means — interest, units, NAV, and more — so you never feel confused again.

📩 Subscribe to Impala Market so you don’t miss it.

Read the previous article Part 4/7: What Are the Risks in Money Market Funds?

Want to invest in Africa’s bond markets? Impala Market helps you track opportunities, compare bond yields and connect with buyers & sellers in the Over the Counter (OTC) market.

• Get real-time bond market insights, track upcoming auctions, and access the secondary (OTC) market to trade bonds effortlessly.

• Weekly insights on bond market developments, macro drivers & investment opportunities

• Tailored for individual investors, investment clubs, institutional investors, traders & offshore investors

• Subscribe for updates on Impala Market

Disclaimer: Impala Market is a private information-sharing platform for licensed institutions. It is not a licensed securities exchange or trading platform. Indicative prices shared are not offers to the public.

Auction No. 1211 | Date: 13 August 2025
Instruments Offered: 91-day, 182-day, and 364-day T-bills
Total Amount Offered: UGX 355 billion

Source: Bank of Uganda Auction No. 1211

Key Observations

1. Strong Demand for Long-End (364-Day)

• The 364-day T-bill continues to be the anchor for investors seeking high yield with moderate liquidity risk.

• Bid-to-cover ratio of 1.94 with UGX 494.6B tendered vs UGX 255B offered shows solid institutional interest.

• The cut-off yield held at 15.254%, essentially flat from the last auction, showing BoU is holding the line on yield pressures at the long end.

2. Mid-Curve (182-Day) Bids Remain Balanced

• Investors remain cautious about reinvestment risk in H2 FY2025/26.

• With a yield of 13.237%, the 182-day tenor has become a popular play for balancing yield and duration risk.

• Bid-to-cover was slightly lower at 1.40×, showing measured participation.

3. Short-End (91-Day) Cut Sharply

• Only UGX 6.67B was accepted out of UGX 46.9B tendered on the 91-day — a small fraction of total bids.

• Cut-off yield of 10.999% came in flat, indicating BoU is rejecting attempts to push short-end rates higher.

• This mirrors recent patterns in the 2-year bond auctions: the short end is now being actively used by BoU as a liquidity control tool.

Trend Insight: Curve Dynamics Hold

• The yield curve remains steep, with the spread between the 91-day and 364-day now over 420 bps.

• The curve’s shape indicates that markets expect continued fiscal pressure and are demanding a term premium for holding longer-dated securities.

• The curve has not inverted — but the front end is tightly controlled, while the back end remains investor-driven.

So What?

• For Investors: The 364-day remains the most rewarding paper, especially for fixed-income portfolios. However, demand for the 182-day tenor suggests cautious positioning against fiscal or political shocks ahead of FY25/26 budget implementation.

• For Traders: Short-end volatility could rise if BoU continues under-allocating 91-day paper. Monitor secondary market bids closely.

• For Policymakers: The healthy bid-to-cover ratios show there’s still liquidity — but rising yield expectations suggest investor caution is building. The short-end suppression may be sustainable only if inflation and policy credibility hold.

📌 Final Word:

“BoU’s rejection of short-end pressure and steady long-end allocation is a classic curve maintenance play. For now, yields are stable but investor sentiment is quietly watching fiscal policy and reinvestment risks unfold.”

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• Get real-time bond market insights, track upcoming auctions, and access the secondary (OTC) market to trade bonds effortlessly.

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• Tailored for individual investors, investment clubs, institutional investors, traders & offshore investors

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Disclaimer: Impala Market is a private information-sharing platform for licensed institutions. It is not a licensed securities exchange or trading platform. Indicative prices shared are not offers to the public.

• Turnover Slowed: Secondary market volumes dropped to UGX 291B, a 66% decline from the prior week. Liquidity remains tight across desks.

• Long-End Still in Focus: Despite the slowdown, 2043s and 2039s continued to dominate, attracting ~68% of total trades.

• Curve Steady: Minimal shifts across the yield curve, with the 2Y and 20Y holding around 15.75% and 18.20% respectively.

• No Primary Auctions: The week was auction-free, allowing traders to rebalance and await cues from the August auction calendar.

• Market Sentiment Mixed: Defensive positioning continues, but offshore bids indicate selective confidence in Uganda’s long bond premium.

2. SECONDARY MARKET ACTIVITY

Turnover Summary

• Total Volume UGX 291.1B

• Number of Trades 241

• Avg Trade Size ~UGX 1.21B

• Most Active Day 06 August (UGX 116.5B, 88 trades)

By Maturity Bucket

• < 1 Year: 52B (18%), 2025 & early 2026s

• 2 – 5 Years: 18B (6%), Low participation

• 6 – 10 Years: 9B (3%), Sparse trades

• 10 – 15 Years: 14B (5%), Light flow into 2033–2035

• 15 – 20 Years: 84B (29%), Strong activity in 2039s

• > 20 Years: 114B (39%), High flow into 2040–2043

3. MARKET OUTLOOK

• T-Bill Auction Expected on 14 August – liquidity likely to rotate short-term again.

• August remains auction-light – offering secondary players a window for curve plays.

• 25-Year Bond Launch in November – dealers starting to position portfolios.

• Yield compression possible if donor flows and fiscal discipline hold in Q1.

4. OTC DESK CALL TO ACTION

We invite traders, dealers, and investors to publish their bond runs on Impala Market.
Boost visibility, attract flows, and support market transparency.

To participate, email: impala.market@gmail.com

5. ALPHA BRIEF VS MARKET OUTCOMES

Last Week's Playbook:

• ✅ Buy 2039s below 97.00 → Market held ~96.50 to 97.30 range

• ✅ Stay defensive on mid-curve (2029–2034) → Volumes <5% of weekly trades

• ✅ Hold 2Y for short-term carry → 2Y trades cleared at 15.75%, matching expectations

Miss:

• ❌ Expected activity in 2034s didn’t materialize – demand remained skewed longer

6. YIELD CURVE COMPARISON – Trailing 6 Weeks

Trend: The Curve has been stable with mild long-end flattening. Spread between 2Y–20Y compressed from 260bps to ~245bps.

7. ALPHA INSIGHTS & INTERPRETATION

• 2Y vs 364d Parity – Hold 2Y for better rollover positioning

• 2043 Accumulation at Par – Favorable entry for high coupon investors

• Mid-curve barbell trades – Still unattractive due to illiquidity

• Political & Fiscal Watch – Limited bond supply may tighten spreads

8. TRADING STRATEGY – WEEK AHEAD

Action for each segment with Entry and Exit Targets with justification

• 2Y Bond: Accumulate, 100.00 (Entry) / 101.00 (Exit), Safe carry with T-Bill parity

• 2039: Re-enter, <97.00 / 98.50, Long bond spread trade

• 2043: Hold, 90.00–91.00 / 92.00, High coupon & durable demand

30–90–180 Day Allocation (unchanged):

• 30-day: 30% in T-Bills & 2Y

• 90-day: 50% in 2039 & 2043

• 180-day: 20% in cash or callable allocations

CLOSING THOUGHT

Uganda’s bond market remains range-bound but healthy. High real yields, an auction-light calendar, and selective offshore appetite offer patient investors an opportunity to rotate back into long bonds. Curve-aware positioning remains the best defence.

“They say it’s low risk... but is it really safe?”

If you’ve invested in a money market fund (MMF), or you’re thinking about it, you’ve probably been told it’s a safe and easy place to grow your money. That’s mostly true.

But every investment has some risk. So in this article, we break down:

• The real risks behind MMFs

• What protects your money

• How to choose a safe, well-managed fund in Uganda

⚠️ 1. What Could Go Wrong?

MMFs are not magic. They face three main risks:

a) Credit Risk

The fund invests in short-term debt like T-bills and corporate paper. If one of these borrowers fails to pay back, the fund can lose money.

Corporate paper, also known as commercial paper, is a short-term loan issued by a company (instead of a bank or government) to raise money for things like paying suppliers, covering salaries, or managing cash flow. It usually matures within 30 to 365 days and offers a higher interest rate than government securities — but with slightly more risk. Government securities (like Uganda Treasury Bills) are considered almost risk-free but corporate paper (e.g., a telecom company borrowing short-term) carries higher risk.

b) Liquidity Risk

If too many investors try to withdraw at once, and the fund can’t sell its holdings quickly, it may delay redemptions.

This usually happens during economic panic - like COVID lockdowns - but is rare in well-managed MMFs.

c) Interest Rate Risk

If interest rates suddenly rise, the value of some fund holdings may drop slightly. But because MMFs invest in short-term instruments, this effect is minimal compared to long-term bonds.

2. What Makes MMFs Safe?

Now the good news. MMFs are one of the safest investment products in Uganda because:

✅ They invest mostly in Treasury Bills

These are backed by the Government of Uganda — widely considered the safest investment in the country.

✅ They are regulated by the Capital Markets Authority (CMA)

Only licensed fund managers can run MMFs. They must follow strict rules on:

• What they invest in

• How much risk they can take

• How they report performance

You can check the CMA Uganda website for a list of licensed Unit Trusts and Fund Managers.

✅ They are diversified

MMFs spread your money across many instruments (not just one borrower), reducing the impact of any single default.

✅ Most report daily or monthly performance

So you can see what’s happening and withdraw anytime.

3. What Should You Look for Before Investing?

Here’s your MMF safety checklist:

1. Regulation Is it licensed by CMA Uganda?

2. Fund Factsheet or Prospectus What is it investing in?

3. Liquidity How quickly can I access my money?

4. Performance History What has the return been over the past 6–12 months

5. Transparency Do they share clear monthly statements or updates?

6. Fund Manager reputation Are they well-known and trusted in the market?

❗ If you can’t get clear answers to these questions, don’t invest.

Bottom Line

Money Market Funds are low-risk, but not zero-risk.
They are safe when managed well, regulated and used wisely.

Your job as an investor: Pick a licensed fund, understand what you are buying, and don’t put in money you need tomorrow.

MMFs are not for a gamble, they are for growing your savings quietly in the background.

📬 Next in the Series:

“How to Open and Manage a Money Market Fund Account in Uganda”
We’ll show you exactly how to get started, what documents you need and how to track your earnings.

📩 Subscribe to Impala Market so you don’t miss it.

Read the previous article Part 3/7: How to Use a Money Market Fund in Your Financial Plan - Savings, Emergencies & Cashflow

Want to invest in Africa’s bond markets? Impala Market helps you track opportunities, compare bond yields and connect with buyers & sellers in the Over the Counter (OTC) market.

• Get real-time bond market insights, track upcoming auctions, and access the secondary (OTC) market to trade bonds effortlessly.

• Weekly insights on bond market developments, macro drivers & investment opportunities

• Tailored for individual investors, investment clubs, institutional investors, traders & offshore investors

• Subscribe for updates on Impala Market

Disclaimer: Impala Market is a private information-sharing platform for licensed institutions. It is not a licensed securities exchange or trading platform. Indicative prices shared are not offers to the public.

1. Liquidity Pulled Back: Post-T-Bill auction, trading volumes cooled off to UGX 166.3B, reflecting tighter cash conditions.

2. Offshore Demand Focused on 2035s: Long bond interest remained concentrated in the 2035 and 2043 benchmarks.

3. T-Bill Auction Oversubscription: Strong bank and fund appetite pushed bid-covers to 2.2x on the 364-day.

4. Yield Curve Held Its Shape: Minor steepening; long-end resistance remains intact.

5. Market Eyes November: The 25-year (15%) bond set for debut - redefining the curve's outer edge.

ALPHA BRIEF & MARKET ANALYSIS

Weekly Trading Recap

• Total Turnover: UGX 856.2B

• Peak Activity: 31 July (UGX 430.7B across 102 trades)

• Key Movers:

  • 2035s: Remained heavily bid, tight supply noted

  • 2043s: Accumulated below par for high-coupon carry

  • 2Y–5Y: Quiet, mostly reinvestment trades

Yield Curve & Strategy

• Strategy Focus:

  • Accumulate 2Y over 364d bills: same yield, better duration

  • Re-enter 2039s <97.00 for spread recovery

  • Monitor new 25Y launch for curve extension plays

OUTLOOK INTO LATE AUGUST

• No Bond Auctions Scheduled

• Liquidity Likely to Remain Tight - expect low turnover

• Fiscal Signals Expected - from Q1 FY2025/26 disbursement patterns

• Watch Offshore Reallocation - especially around 2034s and 2043s

Join the Trading Network Post your bond runs and trade interests on Impala.Market.

This Week's Sourcing Corner

Impala Market’s OTC trading network continues to facilitate block trades and price discovery.

For live runs and to post your trade interests, visit the Impala Market trading desk.

Premium Subscription Benefits:

• Performance-tracked alpha calls with 78% hit rate

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Want to invest in Africa’s bond markets? Impala Market helps you track opportunities, compare bond yields, and connect with buyers & sellers in the Over the Counter (OTC) market.

• Get real-time bond market insights, track upcoming auctions, and access the secondary (OTC) market to trade bonds effortlessly.

• Weekly insights on bond market developments, macro drivers & investment opportunities

• Tailored for individual investors, investment clubs, institutional investors, traders & offshore investors

• Subscribe for updates on Impala Market

Disclaimer: Impala Market is a private information-sharing platform for licensed institutions. It is not a licensed securities exchange or trading platform. Indicative prices shared are not offers to the public.

Money Market Funds (MMFs) are not just for investing, they’re also powerful personal finance tools. Whether you are managing school fees, building your emergency fund, or saving to start a side hustle, MMFs can help you grow your money safely and stay financially flexible.

Here’s how.

1. Emergency Fund Parking Lot

You have heard it before: “Everyone should have an emergency fund.”

But where should you keep it?

Best answer: A Money Market Fund.

• Higher interest than a savings account

• Withdraw anytime (usually within 1–2 working days)

• Protected from market swings like stocks or crypto

Rule of thumb: Aim for 3–6 months of your monthly expenses in your MMF.

2. Short-Term Savings Goals

Whether you're saving for:

• Rent

• A wedding

• A new phone or laptop

• NSSF voluntary top-up

• Capital to start your business

MMFs let your money work while you wait.

Example: Saving UGX 500,000 per month for 12 months in a fund yielding 10% annually gives you UGX 6.3M+ not just UGX 6M.

It is a safe place to build up towards a goal without the pressure or risks of long-term investments.

3. Cash Flow Buffer for Freelancers and Hustlers

If your income is irregular for example a freelancer, boda rider or small business owner MMFs can help:

• Store your inflows while waiting to pay bills

• Earn interest while your cash sits

• Avoid spending everything in your mobile wallet

Tip: Set up an MMF account linked to your mobile money or bank so you can “sweep” excess cash into it and withdraw only when needed.

4. Alternative to Fixed Deposits

Fixed deposits lock your money for months. If you break early, you lose interest. MMFs offer better liquidity with similar returns.

• No penalties for withdrawing early

• Compound interest daily/monthly

• More flexibility in top-ups and withdrawals

If you’re unsure about locking your money for 3–6 months, go with an MMF instead.

5. Peace of Mind While You Decide

Sometimes, you don’t know where to invest next stocks? land? a business?

Use a MMF as a “thinking account” while you decide. Your cash earns interest while you plan, research, or wait for the right opportunity.

“Do not let idle money sit in a zero-interest account.” - every wise investor, ever.

Bonus: Use It for Sinking Funds

Sinking funds are money set aside in advance for expected expenses like:

• School fees

• Medical insurance

• Annual trips or celebrations

Use MMFs to hold and grow these funds until you need them. It’s budgeting with benefits.

📌 Final Word: MMFs Are More Than Just Investments

They are financial tools that:

• Grow your idle cash

• Offer flexibility

• Keep your goals safe

• Help you stay disciplined

Start small. Start now. Let your money work while you work.

📬 Next in the Series:

“What Are the Risks in Money Market Funds and How Safe Is My Money?”
We will explain what could go wrong, how funds are regulated and how to choose wisely.

📩 Subscribe to Impala Market so you don’t miss it.

Read the previous article Part 2/7: What Drives Money Market Returns in Uganda and How to Compare Funds?

Want to invest in Africa’s bond markets? Impala Market helps you track opportunities, compare bond yields and connect with buyers & sellers in the Over the Counter (OTC) market.

• Get real-time bond market insights, track upcoming auctions, and access the secondary (OTC) market to trade bonds effortlessly.

• Weekly insights on bond market developments, macro drivers & investment opportunities

• Tailored for individual investors, investment clubs, institutional investors, traders & offshore investors

• Subscribe for updates on Impala Market

Disclaimer: Impala Market is a private information-sharing platform for licensed institutions. It is not a licensed securities exchange or trading platform. Indicative prices shared are not offers to the public.

The 06 August 2025 Treasury bond auction, featuring a new 25-Year benchmark alongside re-openings of the 2-Year and 15-Year bonds, revealed the Bank of Uganda’s increasingly tactical posture.

The most notable outcome was the deliberate under-allocation on the 25-Year bond, despite overwhelming demand, signaling the central bank’s discomfort with the market's pricing expectations. BoU continues to leverage auction strategy to shape the yield curve, reinforce policy credibility and manage refinancing costs ahead of a potentially turbulent H2 fiscal period.

Auction Results Overview

Notable Observations

• The 2-Year tenor was oversubscribed and accepted at slightly above-market levels, a classic liquidity anchor play.

• The 15-Year bond saw moderate demand and was cleared at a 17.65% yield, up ~15bps from the last auction, consistent with steepening.

• The 25-Year bond saw UGX 745B in bids, but only 11.9B of competitive bids were accepted, with BoU instead opting to fill UGX 45.6B non-competitive.

What’s a “Liquidity Anchor Play”?
When a central bank strategically prices short-term bonds (like the 2-Year) just above market to soak up excess liquidity and guide yield expectations, without letting long-term rates spiral.

In this auction, BoU used the 2-Year as a “liquidity anchor”, offering slightly better pricing to encourage participation while maintaining control over the broader curve.

Policy Interpretation: A Curve-Control Strategy in Motion

1. BoU Is Setting a Ceiling

The limited acceptance on the 25Y despite heavy demand signals a line in the sand. The market clearly priced in a higher yield, but BoU refused to validate those levels. Accepting only non-competitive bids helps extend the curve without distorting it.

This is consistent with recent T-Bill behavior, especially the 91-day segment, where BoU has shown reluctance to move short rates aggressively despite strong market bids.

Impala Market Take: BoU is engaged in passive yield curve control - tolerating moderate steepening while avoiding a runaway repricing at the long end.

Auction vs Secondary Market Comparison

• The 25Y bond's 16.00% cut-off is visibly below secondary market pricing (~16.20%), supporting the thesis of a managed rollout.

• The 15Y bond cleared at a premium, possibly influenced by limited participation or term premia.

Macro Backdrop

BoU’s posture must be read in the context of:

• Delayed donor inflows, creating fiscal funding pressure

• Heightened reinvestment risk, especially at the short end

• Approaching 2026 elections, which may raise long-end risk premiums

• A still-anchored Central Bank Rate at 9.75%, though inflation has crept higher (core CPI ~4.1%)

This backdrop explains the steepening pressure, with markets demanding higher compensation for duration and fiscal uncertainty.

Investor Implications

For Asset Managers:

• Tread carefully at the long end: While the 25Y bond may appear attractive, secondary liquidity and duration volatility make it more suitable for liability matching institutions (e.g. pension funds).

• Front-end & belly remain tradable: The 2–5Y segment offers better risk-adjusted return potential with decent liquidity and tighter pricing bands.

• Curve plays are back: With BoU anchoring short rates and allowing long-end steepening, 2s/10s and 2s/15s flatteners may offer tactical opportunity.

For Primary Dealers:

• BoU’s acceptance patterns signal that bid discipline will be rewarded. Overpricing to extract risk premium will continue to be met with rejection.

• Non-competitive allocations are gaining weight - consider strategic use of this channel in future long-dated auctions.

For Policymakers:

• The market is showing up but demanding to be paid.

• Fiscal authorities must take note: duration risk is priced, and sustained funding needs may push yields further unless managed with transparency and coordination.

• Communication matters: Clear signaling on fiscal plans, especially around Eurobond refinancing and concessional inflows, will lower term premia.

Outlook for August 2025 Auctions

With another round of auctions due on August 21, we expect:

• Continued curve steepening, unless BoU intervenes more aggressively

• Reinvestment flow rotation from maturing T-bills into mid-belly tenors

• Heightened interest in 5–10Y bonds as asset managers look for stable carry amid political and inflation noise

Secondary Market Implications

1. Short and Mid-Curve Activity to Rise

The 2Y and 15Y are now more liquid. Expect higher secondary trading as dealers offload excess allocation and roll positions.

2. 25Y Bond Remains Illiquid

With the bulk allocated to long-hold institutions via non-competitive bids, the 25Y is unlikely to see much OTC activity in the near term.

3. Sentiment Signal: “No to Aggressive Long-End Pricing”

BoU’s rejection of UGX 750B in 25Y bids reflects unease with the market’s demanded risk premium. Long-end traders will be cautious.

4. Positioning Ahead of 21 August Auction

Traders will likely rotate toward the belly (5Y–10Y), where risk-return profiles are more stable. Demand for 25Y exposure may shift to the secondary market, if priced well.

Summary

“BoU is extending the yield curve with a steady hand, not to chase funding, but to shape expectations. The market is liquid and willing, but it's also demanding a premium. The central bank’s selective bid acceptance reveals both discipline and caution in equal measure.”

Uganda’s Treasury Bill auction (No. 1210) held on Wednesday, July 30 gave us some key signals on short-term investor sentiment.

Auction Snapshot

What the Results Tell Us

• 91-Day T-Bill:
  A very high bid-to-cover ratio (19.2x), but BoU only accepted UGX 2.5B out of UGX 47.7B tendered.
  Signal: The BoU is likely managing supply tightly on the short end to discourage excess liquidity churn.

• 182-Day T-Bill:
  Steady demand and accepted bids suggest this is becoming a “sweet spot” for cash managers balancing yield and reinvestment risk.

• 364-Day T-Bill:
  Weak bid-to-cover (1.28x) and full take-up of competitive bids shows investors are demanding more yield for locking in over the medium term. The 15.25% yield could anchor pricing expectations for the upcoming bond auction.

2. What to Expect – Treasury Bond Auction on August 7, 2025

BoU is coming back with UGX 1.1 trillion in Treasury bonds, including a historic first 25-Year bond.

Here’s what’s on offer:

Strategic Positioning: What to Watch

25-Year Bond (UGX 500B) – Market Landmark

• First ever 25Y bond, highly anticipated.

• Offers 17.0% coupon, the highest on the curve.

• Likely to attract pension funds (e.g. NSSF) and insurance firms.

• Expect some duration premium to be built into cut-off yields (possibly 17.3–17.5%).

What’s a Duration Premium?
Investors demand higher yields for holding longer-term bonds due to greater uncertainty over interest rates, inflation, and liquidity. In Uganda, the new 25-year bond will likely carry a duration premium above the 15- and 20-year benchmarks, reflecting market caution about locking up capital for the long haul.

5-Year Bond – Mid-Curve Compass

• New issuance fills a key tenor gap.

• Yields may settle around 16.3–16.7%, pricing in inflation and fiscal risks.

• Demand could be tactical with banks and funds seeking relative value.

2-Year & 15-Year Re-openings

• Familiar papers, useful for curve maintenance.

• 2-Year could see demand from risk-averse bidders.

• 15-Year already widely held, could see moderate follow-on interest.

“By reopening the 2-year and 15-year bonds, BoU is maintaining key curve points to support price discovery, liquidity, and investor confidence — especially as it integrates the new 25-year benchmark.”

Market Context & Macro Backdrop

• BoU has kept policy rates stable, but yield drift in T-bills shows risk premiums are rising.

• Donor funding has resumed, but cashflow execution may take time.

• Pre-election uncertainty and fiscal overhang will weigh on investor confidence in H2 2025/26.

📌 Final Thoughts: What This Means

• The 25-Year issuance is a milestone for Uganda’s domestic debt market. It tests appetite for ultra-long duration and builds credibility in the local curve.

• Auction dynamics will signal how far investors are willing to go to absorb risk in exchange for yield.

• Expect price discovery across the curve, especially for 5Y and 25Y tenors.

• Traders, analysts, and portfolio managers should prepare for a more volatile bond market as issuance ramps up and investors digest new supply.

Next Steps
We’ll be covering auction results and secondary market reactions after August 7.

Subscribe for the next edition: blog.impala.market

Want to invest in Africa’s bond markets? Impala Market helps you track opportunities, compare bond yields, and connect with buyers & sellers in the Over the Counter (OTC) market.

• Get real-time bond market insights, track upcoming auctions, and access the secondary (OTC) market to trade bonds effortlessly.

• Weekly insights on bond market developments, macro drivers & investment opportunities

• Tailored for individual investors, investment clubs, institutional investors, traders & offshore investors

• Subscribe for updates on Impala Market

Disclaimer: Impala Market is a private information-sharing platform for licensed institutions. It is not a licensed securities exchange or trading platform. Indicative prices shared are not offers to the public.

“I see the monthly statement showing the interest, but I don’t understand where it comes from.”

If you’ve ever wondered why your return this month was higher or lower than last month, or how to know which fund is doing well, this article is for you.

What Exactly Are You Earning?

When you invest in a Money Market Fund (MMF), the return you earn is based on the interest the fund earns from:

• Government Treasury Bills (T-bills)

• Short-term bank deposits (fixed deposits)

• Corporate paper (short-term loans to top-rated companies)

Each of these instruments pays a specific interest rate, and the fund manager mixes them to maximize yield while keeping risk low.

Why Do Returns Change Month to Month?

Your return may not be exactly the same every month. That’s normal. Here’s what affects it:

1. Treasury Bill Rates

• These are auctioned bi-weekly by Bank of Uganda.

• If T-bill rates go up, money market returns usually rise.

• If T-bill rates fall, your return declines a bit too.

For example, if the 91-day T-bill drops from 13% to 11%, your MMF might earn slightly less interest that month.

2. Cash Levels in the Fund

• If more people are joining the fund, it takes time to deploy all the new money into high-yield investments.

• Temporary cash drag can reduce returns slightly.

Temporary cash drag happens when a money market fund holds more cash than usual, often due to inflows from new investors, and hasn’t yet reinvested that money into interest-earning assets like Treasury Bills or fixed deposits. Until the fund manager deploys the cash, it earns little or no return, and this slightly reduces the average return for everyone in the fund that month.

3. Fees and Expenses

• Fund managers charge a small fee (usually 1% to 2% annually).

• The more efficiently they run the fund, the less it eats into your returns.

4. Risk Management Choices

• Some funds stay ultra-conservative to protect capital, earning slightly lower but more stable returns.

• Others take slightly more risk (e.g., lending to blue-chip corporates) to try and boost returns.

An ultra-conservative money market fund strategy means the fund manager chooses to minimize risk at all costs, even if it results in slightly lower returns. The fund only invests in the safest and most liquid assets, typically short-term government treasury bills and top-rated bank deposits, avoiding anything that could lose value or delay redemptions.

How to Compare Different Money Market Funds

Not all MMFs are the same. Here’s a simple checklist:

1. Annual Yield: Look at the net return to investor (after fees)

2. Consistency: Is the return stable across 6–12 months?

3. Liquidity: Can you withdraw in 1–2 days?

4. Fund Size: Larger funds may get better investment deals

5. Transparency: Are statements and returns easy to access?

6. Fees: Lower is better but performance matters more

7. CMA Licensing: Only invest in licensed funds

Simple Rule of Thumb

A good MMF should earn you 8% to 12% per year (net of fees) in Uganda today, depending on market conditions. That’s UGX 80,000 to UGX 120,000 per year on a UGX 1 million investment.

📌 What You Can Do as an Investor

• Ask questions: Request the current yield or fact sheet before you invest.

• Track your monthly returns: Keep a record, even in a notebook or Excel sheet.

• Reinvest consistently: Compounding monthly interest leads to better long-term gains.

• Watch market rates: T-bill auction results are a good proxy for MMF performance trends.

📬 Coming Up Next

“How to Use a Money Market Fund in Your Financial Plan - Savings, Emergencies & Cashflow.”
We shall explore practical ways to use MMFs in everyday money life, not just as a passive investment.

Read the previous article Part 1/7: What is a Money market Fund and Why is everyone talking about it in Uganda?

Want to invest in Africa’s bond markets? Impala Market helps you track opportunities, compare bond yields and connect with buyers & sellers in the Over the Counter (OTC) market.

• Get real-time bond market insights, track upcoming auctions, and access the secondary (OTC) market to trade bonds effortlessly.

• Weekly insights on bond market developments, macro drivers & investment opportunities

• Tailored for individual investors, investment clubs, institutional investors, traders & offshore investors

• Subscribe for updates on Impala Market

Disclaimer: Impala Market is a private information-sharing platform for licensed institutions. It is not a licensed securities exchange or trading platform. Indicative prices shared are not offers to the public.