The Uganda shilling posted notable gains against the US dollar during today’s session, closing firmer at 3705/3715 from opening levels of 3720/3730.
The move was largely supported by strong dollar supply on the interbank market. Furthermore, mid-month tax remittances underpinned demand for the local currency, while corporate dollar demand remained largely on the sidelines.
In the money markets, market was awash with liquidity following a recent wave of government releases with overnight and one-week funding rates averaging 9.50% and 9.90%, respectively. Despite the comfortable liquidity environment, the Central Bank stayed on the sidelines and refrained from conducting any liquidity management operations.
The Bank of Uganda conducted a Treasury bond auction today, reopening the benchmark 3-year, 10-year, and 20-year Treasury bonds with a total offer size of UGX 990 billion. Investor demand remained strong, supported by ample liquidity in the money market and reinvestment flows from recently paid bond coupons and maturing government securities.
The benchmark bonds cleared at yields of 12.00% (3-year), 15.00% (10-year), and 15.65% (20-year). In total, the auction recorded face-value allocations of UGX 1.146trillion, representing an acceptance rate of 115.8% of the amount offered.
Overall auction results suggest a positive funding environment for the Government, with declining borrowing costs and healthy investor participation across the maturity spectrum.
