By Beatrice Nakibuuka
In Uganda’s evolving financial landscape, treasury bills and bonds have become stable, low-risk investment instruments that appeal to both individuals and institutions.
As inflation bites and the stock market remains volatile, many Ugandans are turning to government securities for security and predictable returns.
But what exactly are treasury bills and bonds? Who can invest in them, and what makes them attractive?
Treasury bills, bonds
Treasury bills (T-bills) are short-term debt instruments issued by the Government of Uganda through the Bank of Uganda (BoU). According to Moses Byamugisha, a marketing manager at the BoU, they mature in 91, 182, or 364 days. Buying a T-bill essentially means lending money to the government for a short time.
Treasury bonds, in contrast, are long-term government debt securities with maturities of 2, 3, 5, 10, or even 20 years. Like T-bills, bonds are auctioned by the BoU and pay interest (coupon) every six months until maturity.
Investing in T-bills, bonds
T-bills and bonds are accessible to Ugandans aged 18 and above with a valid national ID, registered institutions, and foreign investors—though the latter must go through a licensed broker or commercial bank.
“To invest, one must open a Securities Central Depository (SCD) account with a commercial bank or broker. It is like a bank account but is used specifically for holding government securities,” Byamugisha explains.
Applications are submitted through licensed primary dealers such as Stanbic, Absa, DFCU, or Centenary Bank. The BoU also publishes an auction calendar.
Investors choose their preferred duration-91, 182, or 364 days for T-bills, and 2–20 years for bonds.
“Non-competitive bidding lets the Bank of Uganda determine the interest rate, making it ideal for beginners. Competitive bidding allows one to specify a preferred rate and is more suitable for those with large sums,” Byamugisha adds.
The minimum investment is UGX 100,000, with additional amounts in multiples of the same. Upon maturity, the principal and any interest are credited to the investor’s bank account.
Why invest in T-bills, bonds?
Treasury securities are among the safest investments available in Uganda today. They are backed by the full faith and credit of the government, making them highly reliable.
“Unlike private companies or risky ventures, the likelihood of the government defaulting is extremely low,” says Byamugisha.
T-bills are purchased at a discount and redeemed at face value, giving a known return at the time of investment. Bonds offer fixed interest every six months, providing steady income and allowing investors to plan cash flows confidently.
For retirees or those seeking regular income, these bi-annual payments serve as a dependable source of passive income.
While these securities have fixed maturity dates, they are tradable on the secondary market. Investors can sell their holdings through a broker or bank if they need to access funds before maturity. Though resale prices depend on market conditions, this option provides some liquidity—especially for shorter-term instruments like T-bills.
“Bonds with longer maturities may benefit from tax incentives,” Byamugisha notes, adding: “Interest earned on such bonds may be partially or fully exempt from withholding tax, depending on current government policy.”
Risks, downsides
Though low-risk, T-bills and bonds are not entirely free from downsides.
If inflation exceeds the return, the real value of earnings diminishes. For instance, a 12 per cent return in a 10 per cent inflation environment yields just a 2 per cent real return.
Rising market interest rates reduce the value of existing bonds, as new ones offer better rates. If one sells during such a period, losses are possible.
Secondary market liquidity is not always guaranteed. During economic uncertainty or low demand, investors may struggle to find buyers or be forced to sell at lower prices. This is more common with long-term bonds.
Currency fluctuations also pose a risk, especially for foreign investors or Ugandans abroad. A depreciating shilling could erode the value of returns when converted back to foreign currency.
Contribution to national development
Funds raised help finance infrastructure, healthcare, education, and agriculture. In years of low tax revenue, due to economic shocks or sector underperformance, the government relies on treasury instruments to maintain essential services.
Additionally, T-bills and bonds are tools the BoU uses to regulate money supply, control inflation, and stabilise interest rates.
Final thoughts
While other instruments like corporate bonds or unit trusts may offer higher returns, they come with more risk and less government backing. T-bills and bonds remain a preferred haven for conservative investors and institutions.
Whether you are saving for education, seeking stable retirement income, or managing idle funds, treasury bills and bonds provide a secure, affordable, and impactful option.
“Beyond personal gain,” Byamugisha concludes, “investing in government securities supports national development. For anyone looking to grow their money safely while contributing to Uganda’s future, these are a wise choice.”
