Africa debt-High demand seen for Uganda 2-yr bond
Dec 02, 2011
LONDON- Uganda's final bond auction of the year is expected to attract strong interest from local and foreign investors eager to lock in yields at unprecedented levels.
LONDON- Uganda's final bond auction of the year is expected to attract strong interest from local and foreign investors eager to lock in yields at unprecedented levels.
UGANDA- A 2-year bond auction in Uganda next week is likely to attract strong demand as domestic and offshore investors take advantage of record yields.
The central bank, which has raised rates aggressively this year to combat soaring inflation, kept its benchmark rate on hold on Friday after inflation fell to 29.0 percent in November from 30.4 percent the previous month.
The Bank of Uganda will offer 95 billion Ugandan shillings ($37 million) of 2-year bonds next Wednesday, the last bond auction of 2011.
Yields on 2-, 3- and 5-year paper have hit all-time highs at recent auctions, which have all been oversubscribed. The 2-year bond has been especially popular, with the last sale achieving a bid to cover ratio of 2.79.
"There seems to be a lot of appetite here for the 2-year bond," said Kirui. "For local fund managers as well as banks, it's a tenor that is quite attractive."
Rising interest from offshore investors is likely to curb any sharp increases in yields at next week's sale, said Raymond Mutibwa, head of rates and credit trading at Standard Chartered Bank Uganda.
"With renewed interest from offshore players we expect yields to hold, if not gradually decline by at least 30 to 40 basis points," he said.
The level of offshore participation in a Treasury bill auction this week was around 34%, Mutibwa added.
"It has continued to grow over the last couple of months," he said. "Around the last bond auction we saw about 25 percent."
The 91- and 182-day bills yielded 23.39 percent and 24.26 percent respectively at Wednesday's Treasury bill auction, up from 22.17 percent and 23.71 percent two weeks ago. The 364-day bills' yield rose to 24.31 percent from 23.99 percent.
Meanwhile, in Kenya yields are expected to climb further as the central bank maintains its tightening policy stance.
Reuters