Understanding the Uganda Government Securities Yield Curve

The yield curve is one of the most important charts in finance, yet most Ugandan investors have never seen one for our own government securities. Let's change that.

What Is a Yield Curve?

A yield curve is simply a chart that plots interest rates (yields) against time to maturity for government securities. On the left side you have short-term instruments (91-day T-Bills), and on the right you have long-term ones (20-year T-Bonds).

How to Read It

Normal (Upward Sloping)

The most common shape. Longer-term securities pay higher yields because: - Investors demand more compensation for locking up their money longer - There's more uncertainty about inflation and interest rates further into the future - The Bank of Uganda typically offers higher rates to attract long-term funding

What it means: The economy is expected to grow steadily. This is the "healthy" shape.

Flat

When short-term and long-term rates are nearly the same.

What it means: Uncertainty about the economic outlook. Investors aren't being rewarded much for taking on longer-term risk.

Inverted

When short-term rates are higher than long-term rates. This is rare but significant.

What it means: Often signals economic concern. Investors may be rushing into long-term bonds for safety, driving those yields down.

Uganda's Yield Curve Today

Uganda's yield curve typically slopes upward, with: - 91-day Bills yielding around 10-12% - 364-day Bills yielding around 12-14% - 5-year Bonds yielding around 15-17% - 10-20 year Bonds yielding around 16-18%

The spread between short and long-term rates tells you how much extra return you earn for committing your money for longer periods.

What to Watch For

Steepening Curve

If the gap between short and long-term rates is widening, it may suggest: - Rising inflation expectations - Expected interest rate increases - Good time to consider shorter-term securities

Flattening Curve

If the gap is narrowing: - Inflation expectations may be falling - Could be a good time to lock in long-term rates before they drop further

How to Use This Information

1. Compare dates — Look at how the curve has shifted over time to spot trends
2. Find the sweet spot — Sometimes mid-term bonds (3-5 years) offer the best risk-reward tradeoff
3. Consider tax — Remember that Bills (20% WHT) and Bonds (10% WHT) have different tax treatments, which changes the effective curve shape

Explore It Yourself

Visit our Interactive Yield Curve to: - View the current yield curve across all tenors - Compare two different dates to see how rates have shifted - Identify which maturities are offering the best value right now

New to government securities? Start with our guide on T-Bills vs T-Bonds to understand the basics.