The Short End Split in Two, and Prices Rose for the Sixth Month Running
- Ugx 990bn
- Bonds offered Wednesday
- 16.925%
- The 20-year sold at
- 4.6%
- September inflation
- 3,973
- Shillings to the dollar
- 1The short end of the market split in two, and the Bank chose which half to pay.
- 2Prices rose for the sixth month running, and the part that hurts most is the smallest.
- 3Uganda paid 16.925% for 20-year money, and Bank of Uganda took more than it offered.
- 4Where the curve is sitting: what each government security keeps after tax, at the price paid the last time it was sold.
The government came to the market on Wednesday asking for Ugx 990 billion and left with Ugx 1,039 billion, paying 16.925% for twenty-year money in a week when prices are rising faster than at any time in a year and the shilling is near a record low.
The question was never whether the government would pay. It was which maturity it would decide to pay for, and it has now answered.
Weekly Markets Overview: 5 – 9 October 2026
Last week in a nutshell
Bank of Uganda auctioned Treasury bills on Wednesday 30 September. The three maturities did not move together at all, and what the Bank did with the money it was offered says more than the rates do.
| Bill | Sold at | On 2 Sep | Change | Offered / taken | Share of offer taken |
|---|---|---|---|---|---|
| 91-day | 10.058% | 10.112% | −5bp | 15bn / 26bn | 174% |
| 182-day | 11.041% | 10.250% | +79bp | 35bn / 20bn | 57% |
| 364-day | 11.502% | 11.001% | +50bp | 300bn / 311bn | 104% |
| Total | — | — | — | 350bn / 357bn | 102% |
Look at how much the government accepted, not just the interest rate. For the 91-day bill, the rate fell slightly and the government took 174% of the amount it had planned to borrow. But for the 182-day bill, where investors wanted about 11%, it took only about half of what it offered and rejected most of the big banks’ bids. That suggests the government had a target price in mind and was willing to reject investors who wanted more.
It is the same pattern we saw the week before, but at the other end of the curve. On 23 September, Bank of Uganda accepted 296% of the 25-year bond but only 10% of the 5-year. When the Bank thinks investors are asking for the wrong price, it accepts very little; when it thinks the price is reasonable, it accepts much more. So for investors, the total amount accepted is less important than which bond the Bank chose to fill.
How our calls landed last week
| Bill | Our published range | Centre | Outcome | Verdict |
|---|---|---|---|---|
| 91-day | 10.100 – 10.850% | 10.450% | 10.058% | Outside by 0.04 |
| 182-day | 10.300 – 11.150% | 10.700% | 11.041% | Inside |
| 364-day | 11.000 – 11.900% | 11.450% | 11.502% | Inside |
| Total accepted | 100 – 140% of offer | — | 101.9% | Inside |
So why did it come out that way?
- The missing piece was how banks wanted to use their money. We expected tighter liquidity, a government needing cash, higher long-term rates, and a government able to reject expensive bids. The first three were right, but the last one did not affect all maturities equally.
- Banks were willing to pay more for short-term liquidity. After the reserve requirement increased, banks had less money available, so they preferred investments that return their money quickly. They accepted a lower return for three months, but wanted a much higher return to lock their money away for six. That is why the government took 174% of the 91-day offer even though its rate fell, but rejected the 182-day bids asking for more.
- The size of the auction also matters. Of the Ugx 350 billion offered, Ugx 300 billion was for the 364-day bill; the 91-day and 182-day together were only Ugx 50 billion. So when we say the government accepted 102% of the total, most of that came from the 364-day. It does not mean the whole market behaved the same way.
- The bigger message is that Bank of Uganda was managing which maturities it borrowed in, rather than simply trying to raise as much money as possible. It took money where the price suited it and rejected it where investors demanded too much.
In simple terms: banks paid for flexibility and demanded more money for locking up their cash.
What this potentially meant for Wednesday
The lesson from this auction is simple: where the government really needs the money, it may be willing to pay for it. Of the Ugx 990 billion on offer Wednesday, Ugx 430 billion was in the 20-year bond and Ugx 230 billion in the 3-year. Based on the pattern in the bill auction, we expected the 3-year to be heavily rationed and the 20-year to be filled in full, even if investors demanded a higher return.
Inflation was 4.6% in September, up from 4.1%. The Bureau of Statistics published it on Wednesday 30 September. Prices rose 0.88% in the month alone. The newspapers called it a third consecutive rise; the Bureau’s own release carries fourteen months of figures and shows something longer: inflation bottomed at 2.8% in March and has risen every single month since, 1.8 percentage points in half a year.
| Part of the basket | Share | September | August | Share of the 4.6% |
|---|---|---|---|---|
| Everything (headline) | 100% | 4.6% | 4.1% | — |
| Core: what policy can reach | 84.0% | 3.7% | 3.5% | 3.11% |
| Energy, fuel and utilities | 6.5% | 14.5% | 14.3% | 0.95% |
| Food crops | 9.5% | 4.5% | 2.1% | 0.43% |
A small part of what households spend is causing a big share of inflation. Food prices got most of the attention, but food crops add only 0.43 to the 4.6%. Energy, fuel and utilities are a smaller part of household spending, yet they add 0.95. That helps explain why households can feel more pressure than the headline suggests: fuel and energy costs are taking a bigger bite out of budgets.
What 4.6% actually costs
Inflation quietly reduces the value of money that is not growing by at least 4.6%. If your money is sitting in a current account earning nothing, or in savings earning 2–3%, it has lost purchasing power over the past year even though your bank statement shows no loss. The same applies to salaries that have not risen by 4.6%, rent, fixed-price contracts and business cash sitting idle. And 4.6% is only an average. Food makes up 27% of household spending and rose 4.7%, while transport makes up 10.5% and rose 9.8%. Fuel rose more sharply still: petrol 30.9%, diesel 42.5% and kerosene 32.8%.
It also limits what Bank of Uganda can do. With inflation already at 4.6%, close to the 5% target, and rising for six months in a row, there is little room to loosen policy. Because much of the pressure comes from imported fuel, raising the Central Bank Rate would not make fuel cheaper. Instead, BoU tightened the amount banks can lend by raising the cash reserve requirement, which also supports the shilling and makes imported fuel cheaper in shilling terms.
The number to watch is October’s inflation. If it rises for a seventh month in a row, BoU’s forecast of 5.5–6.0% will start looking less like a forecast and more like the direction prices are already taking.
What happened internationally
America added only 29,000 jobs in September, far below the 84,000 expected, and the previous two months were revised down by 60,000. July, for example, was changed from a gain of 21,000 jobs to a loss of 10,000. The US job market is close to stalling. That sharply reduced expectations of another rate rise by the Federal Reserve on 28 October, with the probability falling from about 70% earlier in the week to just 14–25%. But long-term borrowing costs still went up: the 10-year rate rose from 5.17% to 5.28% and the 30-year from 5.49% to 5.61%, while the dollar strengthened for a fourth straight week. The reason was inflation: a widely watched survey showed manufacturers paying the highest prices for inputs since March. The job market is weakening, but costs are still rising. That makes it difficult for the Fed to cut, while investors lending for 10 or 30 years still want higher returns.
| What | Level | Why it matters here |
|---|---|---|
| US 10-year government bond | 5.28% | The closest thing to a risk-free return in the world. Every borrower on earth, Uganda included, is priced above it. |
| US 30-year | 5.61% | Long-term money got dearer, not cheaper. |
| The dollar’s strength | 101.93 | A fourth straight weekly rise. A stronger dollar is a weaker shilling, almost mechanically. |
| Brent crude, futures | US$102.25 | Roughly flat on the week — but see below. The futures price is not what Uganda pays. |
| Gold | Fell a second week | Uganda’s largest export earner, on a stronger dollar and higher American rates both weeks. |
| Coffee (robusta) | +4.9% on the week | What Uganda actually grows, as opposed to the arabica price usually quoted. The one export line that moved in Uganda’s favour. |
- The interest rates. The US 10-year rate is what the American government pays to borrow for ten years. Because US government debt is seen as one of the safest investments in the world, investors use it as a benchmark when pricing everything else, so when it rises Uganda may have to offer more to stay attractive. The 30-year tells us more about how investors see the longer future. Both rose even though the jobs report was weak. Normally weak jobs data pushes long rates down; this time inflation worries outweighed it.
- The dollar’s strength. It has now risen four weeks in a row, showing that global demand for dollars remains strong. Uganda pays for most imports, especially fuel, in dollars, so a stronger dollar means a weaker shilling and, eventually, dearer imported goods.
- Gold, what Uganda sells most of. A second losing week can mean less dollar income from one of Uganda’s biggest exports. A stronger dollar makes gold dearer for buyers using other currencies, and higher US rates make it less attractive because gold pays no interest. The stronger dollar, higher US rates and weaker gold price are really parts of the same story.
- Coffee, robusta, which Uganda actually grows. The coffee price usually in the news is arabica, but Uganda mainly produces robusta, and the two can move differently. This week robusta rose 4.9%, the only major move in this table that clearly worked in Uganda’s favour.
- Oil, what Uganda buys. Brent ended the week at US$102.25, which may look like a small move. But Brent is the price of a traded contract, not the price Uganda pays at the pump: Uganda imports refined fuel rather than crude, so the price actually paid can differ. Still, the direction matters: when global oil rises, fuel costs in Uganda eventually follow.
And the oil Uganda is waiting on
The East African Crude Oil Pipeline reached 93% complete on 1 October. Tanzania’s and Uganda’s Auditors General visited the Tanga terminal, called the progress impressive and said they anticipated first oil in early 2027. Treat that as an auditor’s impression on a site visit, not a revised date: the official target, set in September after the July 2026 deadline was missed, is later in the financial year, and it is the fifth target date since 2018. The pipeline was 91% complete on 6 August and 92.7% on 1 September, so September added 0.3 of a percentage point.
The government sold bonds on Wednesday 7 October
Uganda paid above 16% for 20-year money. The question is answered, and the answer was larger than we or the market expected.
| Bond | Last auctioned at | Our call | Sold at this auction | Share of offer taken |
|---|---|---|---|---|
| 3-year re-opening | 12.000% | 12.750% | 14.000% | 92% |
| 10-year re-opening | 15.000% | 15.600% | 16.850% | 69% |
| 20-year re-opening | 15.000% | 15.900% | 16.925% | 140% |
What the results tell us
- Rates moved about two percentage points in four weeks. The 3-year went from 12.000% to 14.000%, the 10-year from 15.000% to 16.850% and the 20-year from 15.000% to 16.925%. All three of our calls were too low, by between 0.68 and 0.85 of a percentage point. We anchored on the 25-year clearing at 16.250% on 23 September and assumed a 20-year would sit below it. The market had already moved past that level.
- Bank of Uganda stopped rationing. It rejected 29% of the bids it received, against 54% on 23 September and 70% on 9 September, and it took 105% of what it had offered. A month ago it refused to pay 15.65% and raised only 63% of its target. On Wednesday it paid 16.925% and took more than it asked for.
That is not a central bank choosing a price. It is one clearing the market.
- Demand in the middle of the curve has dried up. Investors offered only 1.03 times the amount on sale for the 3-year and 1.10 times for the 10-year — the thinnest demand of the quarter. Only the 20-year drew real money, at twice the amount offered, and the Bank took 140% of that tranche. Our call that the 3-year would be heavily rationed was wrong in an instructive way: the Bank took 92% of it, because there was barely anything there to ration.
- The reserve requirement is visible in these numbers. Banks are the natural buyers of 3-year and 10-year paper, and 2.5% more of their deposits has been locked up since 24 September. The pattern we described last week — hollow where banks buy, intact where pension money buys — repeated. The difference this time is that the Bank could not simply reject the expensive bids, because it needed the money.
- One technical discovery that matters when you buy. The cut-off price Bank of Uganda publishes already includes the accrued interest that has built up since the bond last paid a coupon — what the market calls a dirty price. On the 10-year, 5.847 of the 101.641 you see is accrued interest rather than the bond itself. It is not added on top when you settle; it is already in the number. It also means the prices in these releases cannot be compared from one auction to the next until that interest is stripped out.
Where the curve is sitting
This is the table that matters, not the auction. It shows what each government security keeps after tax, at the price paid the last time it was sold. Withholding tax follows the individual bond, not the number of years in its name, which is why the 5-year is taxed at 10% while the 2-year is taxed at 20%.
| Instrument | Last auctioned | Market yield | Tax | After tax | Real return |
|---|---|---|---|---|---|
| 364-day bill | 30 Sep | 11.40% | 20% | 9.12% | 3.19% |
| 2-year bond | 23 Sep | 11.95% | 20% | 9.56% | 3.60% |
| 3-year bond | 9 Sep | 12.13% | 20% | 9.71% | 3.74% |
| 5-year bond | 23 Sep | 13.97% | 10% | 12.57% | 6.45% |
| 10-year bond | 9 Sep | 15.38% | 10% | 13.84% | 7.65% |
| 15-year bond | 23 Sep | 15.29% | 10% | 13.76% | 7.57% |
| 20-year bond | 9 Sep | 15.33% | 10% | 13.79% | 7.61% |
| 25-year bond | 23 Sep | 16.08% | 10% | 14.47% | 8.24% |
The waiting is over
Every non-competitive bid was filled in full again on Wednesday — Ugx 991 million at the 3-year, Ugx 3.89 billion at the 10-year and Ugx 4.39 billion at the 20-year, all accepted, while the large banks were cut back. Minimum Ugx 100,000, ceiling Ugx 200 million per security.
We said to wait for Wednesday before buying more long-term bonds. It has answered the question: the 20-year sold at 16.925%, which keeps 15.23% after the 10% tax. That is the highest after-tax return anywhere on the curve, above even the 25-year sold on 23 September, and the Bank took 140% of the amount offered, so an ordinary bidder could actually get filled.
We said to look at how much Bank of Uganda accepts before looking at the yield, and that a clear 15.90% alongside 150% of the offer accepted would be strong evidence the market had genuinely moved. It cleared at 16.925% with 140% accepted. This is a real repricing, not a thin auction producing a misleading number.
It sold at 90.188 against a 15.000% coupon — well below the 100 you are repaid at maturity, and remember that about 2.18 of that 90.188 is accrued interest rather than the bond. You receive the coupon, pay 10% tax on it, and also gain as the price pulls back toward 100. That is more attractive for a taxpayer than the bonds trading above 100 that dominated August’s reopenings.
Two percentage points in four weeks is not a settled market. The shilling is near a record low, inflation has risen six months running and the Central Bank Rate has not moved since before July 2025. Buy an amount you would be content to hold through another move of the same size, and keep something back for the 15-year and 25-year reopenings on 28 October.
It was sold at 100 on 9 September and priced at 90.188 on Wednesday — a fall of about 9.8% in four weeks, and closer to 15% for anyone counting in dollars. It is still a government bond that pays its coupon until maturity, and selling now would turn a fall in market value into an actual loss. The lesson is about how much you buy next, not about what you already own.
Prepared by Glen Busobozi and Lutaaya Victor
What else happened locally
The shilling was Ugx 3,973.56 to the dollar on 1 October, down about 8.9% since the end of 2025. The recent weakness was partly caused by foreign investors selling Ugandan government bonds and taking their money out. But the bigger problem is the ongoing shortage of dollars. In July, Uganda imported US$1.61 billion but exported only US$1.40 billion, leaving a US$210 million gap. Imports are growing faster than exports, creating steady demand for dollars and putting pressure on the shilling. A weaker shilling makes fuel, imports, foreign school fees and dollar loans more expensive, while exporters and dollar earners benefit. Uganda has some protection, though: foreign reserves stood at US$6.69 billion in June, giving Bank of Uganda room to smooth sharp movements.
A date worth putting in your diary. Stanbic Uganda Holdings’ interim dividend of Ugx 4.30 a share has a book closure of Tuesday 13 October. To receive it you must hold the share on that date. Payment follows on or about 11 November, after withholding tax. Stanbic closed at Ugx 112.00 on 2 October.
Uganda’s Capital Markets Authority is co-hosting a free webinar on Tuesday 6 October, 5.00 to 6.30pm. It is called “Building Investor Resilience in Uganda”, subtitled “Navigating Market Volatility and Financial Shocks”, and it is Uganda’s contribution to World Investor Week, the global investor-education campaign running 5–11 October. The co-host is CFA Society East Africa, and the speaker is Godfrey Bukomeko, a senior portfolio manager at Old Mutual Investment Group in Uganda.
It runs the evening before bids close at 10.00am Wednesday on the Ugx 990 billion bond sale. Someone who manages money professionally at one of the largest institutional buyers in this market, speaking in public about volatility some fifteen hours before that deadline, is the closest thing to a professional view an ordinary bidder will get for free this week. Do not expect a tip. A licensed manager on a regulator’s platform during an investor-education week will talk about resilience and avoiding scams, not about where the 20-year ought to sell. It is still worth ninety minutes.
The inaugural Stanbic Uganda Pensions Conference, held on 1 October in Kampala, focused on how Uganda can use its growing pension savings to support both retirement security and long-term economic growth. It also marked the launch of SBG Securities’ pension fund management business. Speakers from government, URBRA, Stanbic and the investment industry highlighted the need to widen pension coverage, especially among informal workers, while creating more suitable long-term investments for pension money. The key message was that pension savings could provide patient capital for infrastructure, housing and industry, but only if investments remain well governed, transparent and focused on protecting members’ money.
Britam Asset Managers Uganda has introduced new savings and investment options, including KidNest, a money market fund designed for children aged 0–25. Parents, guardians and well-wishers can start with Ugx 20,000 and top up from Ugx 10,000, with daily compounding and no lock-in period. The fund is designed to build savings for future needs such as education and healthcare while encouraging children to develop good saving habits. Britam has also introduced 24/7 mobile money access, allowing customers to invest, top up and withdraw without relying on banking hours.
Its wider range runs from the Money Market Fund at Ugx 20,000 and the Umbrella Fund at Ugx 100,000 to the Fixed Income Fund at Ugx 5 million and the USD Fund at US$100. Most funds allow withdrawals at any time, while the Fixed Income Fund pays at maturity.
Fund performance updates
| Unit trust scheme | Daily yield | Annual yield |
|---|---|---|
| Britam Money Market Fund | 9.91% | 11.00% |
| Britam Umbrella Fund | 12.23% | 12.94% |
| Britam Fixed Income Fund | 12.42% | 13.00% |
| Britam USD Fund | 5.10% | 5.70% |
Product features
| Money Market Fund | Umbrella Fund | Fixed Income Fund | USD Fund | |
|---|---|---|---|---|
| To start / top up | Ugx 20,000 / Ugx 10,000 | Ugx 100,000 / Ugx 50,000 | Ugx 5,000,000 / Ugx 2,000,000 | US$100 / US$50 |
| Compounding | Daily | Daily | Monthly | Daily |
| Top up and withdraw | Any time | Any time | Top up any time, withdraw at maturity | Any time |
| Fund access | Within 1 working day | Within 1 working day | Within 1 working day | Within 2 working days |
| Lock-in | None | None | 3, 6 and 12-month tenures | None |
Fund managers Legacy Hills advises for
Legacy Hills Investments works alongside a select group of Uganda’s licensed fund managers, giving our clients access to unit trust and money market options across the industry rather than a single house view. The partners below are the names you will see referenced across our research.
- 01Old Mutual Investment Group Uganda (OMIG) Limited
- 02Britam Asset Managers Company (Uganda) Limited
- 03ICEA Lion Asset Management Uganda Limited
- 04SBG Securities Uganda Limited
- 05Sanlam Allianz Investments Limited
- 06GenAfrica Asset Managers
- 07Cornerstone Asset Managers Limited
- 08Kura Asset Managers
- 09Xeno Investments
- 10NSSF Uganda
- 11XENO Investments Kenya
- 12Etica Capital Kenya
Which maturity it decided to pay for
The question for a saver was never whether the government would pay; it was which maturity it would decide to pay for. It decided on the long one. Of the Ugx 990 billion offered on Wednesday, Ugx 430 billion was in the 20-year, and Bank of Uganda took Ugx 600 billion of it — 140% of that tranche — at 16.925%. It took 69% of the 10-year, and almost everything bid at the 3-year, because there was almost nothing bid. For two months this Bank set the price and cut the size. On Wednesday it paid what was asked. That is the sentence to carry into the 28 October reopenings, when the 15-year and 25-year have to come up to meet this curve.
Published by Legacy Hills Investments Limited, an independent investment advisor. This newsletter is for general information only and does not constitute investment advice. Figures are drawn from Bank of Uganda’s Treasury bill auction press release No. 1235 of 30 September 2026 and its Invitation to Tender for the 7 October bonds; the Uganda Bureau of Statistics’ Consumer Price Index release for September 2026; the Ministry of Finance’s Performance of the Economy monthly reports; the Uganda Securities Exchange; the Capital Markets Authority and CFA Society East Africa; the inaugural Stanbic Uganda Pensions Conference of 1 October 2026; Britam Asset Managers Uganda’s own published fund information; the Federal Reserve and the US statistical agencies; and public market reporting for oil, gold, coffee and currencies. Britam Asset Managers, SBG Securities and Cornerstone Asset Managers are Legacy Hills partner fund managers; anything here touching them is written to inform and never to advise. Investors should confirm current rates before making decisions.
