BoU Prepares Shs 1.4 Trillion Bond Auction

The Uganda shilling remained under pressure against the US dollar on Monday, with the Bank of Uganda’s indicative exchange rates putting the dollar’s buying rate at Shs 4,429.76 and selling rate at Shs 4,439.76, as debate grows over how to contain the currency’s depreciation. 

The latest rates come as the central bank prepares to auction Shs 1.4 trillion in Treasury bonds on Wednesday, October 28, adding another development to watch as policymakers and analysts debate how best to respond to the pressure on the shilling. 

A notice issued by the Bank of Uganda shows that the auction will offer 250 billion shillings in two-year bonds, 350 billion in five-year bonds,  450 billion shillings in 15-year bonds and 350 billion shillings in 25-year bonds.

The securities carry coupon rates ranging from 15 to 16 percent. The auction involves reopening existing government securities. Although Treasury bond sales can influence domestic liquidity and interest rates, the notice does not indicate that the operation is specifically intended to stabilise the shilling. 

The currency’s weakness has prompted renewed discussion about the extent to which the central bank should intervene in the foreign-exchange market, particularly through the sale of dollars from its reserves. 

On October 14, the Bank of Uganda raised its Central Bank Rate by 2.25 percentage points to 12 percent, seeking to contain inflationary pressures amid concerns about the shilling’s depreciation and rising global energy costs. 

The bank also returned to the foreign-exchange market to sell dollars on October 22.