Uganda's debut 25-year bond oversubscribed but most bids rejected
Analysts said the rejection reflected the divergence in the central bank's and investors' assessment of the bond's risk premium.
The Ugandan government introduced the long-term bond, its longest-dated credit instrument yet, to extend its debt maturity profile and limit cashflow pressures.
At the auction, the central bank received bids worth a total of 851.1-billion shillings (R4.26bn) for the 500-billion shillings (R2.50bn) worth of bonds offered, results released late on Wednesday showed. It accepted just 57.2-billion shillings (R286.2m).
The bond had a yield of 16.0%, lower than the 17.6% rate on the 15-year bond also on sale at the same auction.
"The risk premium as seen in the unsuccessful bids indicates what investors perceive as the long-term prospects of the economy," Stephen Kaboyo, managing director of Kampala-based Alpha Capital Partners, told Reuters.
Investors' pricing of the bond's risk, "was out of sync with the issuer", and investors were likely concerned the economy could stumble "under the weight of several years of debt accumulation, with fiscal consolidation becoming more elusive", Kaboyo said.
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