Impala Market Weekly Commentary: Uganda Bond Market Insights (Week Ending 14 June 2025)

This Week in Summary

• BoU auctioned UGX 990B across 2Y, 5Y, and 15Y bonds

• UGX 1.09T accepted across all tenors – strong demand sustained

• Secondary yields tightened across long bonds (up to 50bps compression)

• Curve barbell trades and reinvestment rotation strategies remained in play

• Upcoming: T-Bill auction (19 June), June budget speech in focus (12 June)

Auction Results - 11 June 2025

The BoU reopened 3 key benchmark bonds. Bid-to-cover ratios stayed healthy at 1.4×–1.5× across the curve.

All cut-offs cleared close to secondary levels - no surprises, and no panic.

Secondary Market Activity

Total weekly turnover slowed to UGX 1.47T, down from UGX 1.91T the week prior.

Most Active Bonds:

• 15.00% of 18-Jun-2043 → YTM: 18.05–18.25%

• 15.80% of 23-Jun-2039 → YTM: 17.45–17.80%

• 14.25% of 23-Aug-2029 → YTM: 16.20–16.75%

Key Yields:

• 2Y: ~15.85%

• 5Y: ~16.60%

• 10Y: ~17.60%

• 15Y: ~17.45–17.80%

• 20Y: ~18.25%

The 15Y bond gained 45–50 bps post-auction, offering instant capital gains to auction buyers.

Alpha Brief

Alpha Brief vs Market Outcomes:

Yield Curve Comparison (Trailing 6 Weeks)

The chart below shows how yields have moved across maturities over the past six weeks:

Key Observations:

• 1Y yields remain stable at 12.5%, the short end is anchored.

• 2Y and 5Y yields have firmed notably over the last two weeks, signaling rising reinvestment risk.

• 10Y remains flat at 17.6%, while 15Y eased slightly, showing tightening risk premium.

• 20Y yield has plateaued around 18.25%, signaling a ceiling, unless macro risks escalate.

Alpha Insights & Interpretation

• Yield Compression = Return of Confidence
  Long bonds (especially 2039s, 2043s) saw price action tighten yields post-auction. The market rewarded investors who entered near yield ceilings (≥17.8%).

• Short End Remains Anchored
  2Y and T-Bills are tightly priced. BoU has signaled its intent to hold the front-end stable as budget execution begins.

• Steepness Is Alive
  The curve still pays 250–300bps to move out the duration ladder. This means carry trades remain valid, especially using a barbell strategy.

Trading Strategy - Week Starting 16 June

• Position Ahead of July Supply
  With the FY2025/26 budget now public, expect heavier bond issuance next quarter. Get long-end exposure while yields are still near highs.

• Target 2043 Around 89.00
  YTM of 18.2–18.25% represents a potential top. Use any dip to reload. Avoid chasing above 91.

• Reinvest Short-Term Cash Into 2Y
  Skip new T-Bills unless yields spike. The 2-Year bond (2026) at 15.75% offers better returns and flexibility.

Outlook

Next Auction: Treasury Bills, 19 June 2025
Watch for:

• June Budget Readings
  Closely monitor follow-up implementation plans, deficit financing clarity, and Q1 domestic issuance signals. These will shape yield curve direction going into July.

• Political Rhetoric & Sentiment
  The long end of the curve (15Y–20Y) is especially sensitive to early election positioning, governance debates, and macro stability concerns.

• Liquidity Conditions & Bid/Offer Spreads
  As banks and primary dealers manage mid-year cashflows, wider secondary spreads could signal stress, or opportunity, particularly in thinly traded off-benchmark papers.

OTC Desk Call to Action

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