Bank of Uganda moves to increase uptake of bonds
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- 28 Mar 2022
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Bank of Uganda (BoU) is banking on a mobile solution and offshore indices to grow trade in government bonds.
Retail buyers can now buy T-bills and bonds offered by BoU through their mobile phones with or without a bank account through the Okusavinga mobile platform.
“The Okusavinga initiative is set to facilitate broad-based retail investment in government securities promoting the optimal deployment of domestic savings, and hopefully, reducing the high yields that reflect dominance by the traditional players,” said BoU Deputy Governor Michael Atingi-Ego.
BoU lowered the minimum investment amount for bonds to $27.7, lower than Kenya’s M-Akiba which traded at $30, to make it attractive for retail investors’ and dilute the dominance by banks.
On offshore indices, investment advisors say that they help in tracking and measuring the total return of emerging markets bonds that meet specific liquidity and rating requirements.
Mr Atingi-Ego said they are targeting to have their bonds quoted on Bloomberg African Bond Indices (ABABI), Financial Times Stock Exchange (FTSE) Frontier Market Index, and the JP Morgan Emerging Market indexes.
Mr Atingi-Ego said this will give the government securities ‘’global visibility.’’
Asset managers in Kampala say quoting securities on offshore indices has taken root in emerging markets that were once considered inferior, but now outperform bonds issued by highly rated issuers and governments in developed economies.
Emerging markets
“Because of this shift, many emerging markets have taken steps to get their bonds quoted on these platforms,” said Stephen Kaboyo, the managing director of Alpha Capital, a Kampala-based sovereign asset management firm.
“These indices provide investors with portfolio performance targets, a reference for index-linked products and more importantly they enhance visibility globally,” he said.
Uganda has been working towards having its securities easily traded by offshore investors following the enforcement of the master agreements. The latter safeguards the interests of financial institutions, especially when dealing in transactions involving repos and swaps.
BoU says this has boosted non-resident portfolio inflows into the country, which reached $364.3 million in 2020/2021. The non-resident holdings of government bonds have also grown, reaching $806.2 million by November 2021. Read More…
