What you need to know:
The increase in turnover can be attributed to, among other things, improved investor appetite for government securities and Primary Dealership reforms.
The value of Uganda government bonds traded on the capital markets secondary market increased by 67.4 percent, representing Shs16.2 trillion in the second quarter of 2022. This is up from Shs9.7 trillion in the first quarter of 2022.
The rise in value of the treasury bonds in the secondary market demonstrates a high appetite for Uganda government treasury bonds by the investors due to the high yields in return of their investment.
The Uganda Capital Markets Quarterly Bulletin for quarter two indicates that average monthly turnover also grew to Shs5.4 trillion in the review period from Shs3.2 trillion previously.
“The government bond turnover ratio for the second quarter of 2022 stood at 68.8 percent, compared to 43.6 percent in the first quarter of 2022. The growth in turnover can be attributed to, among other things, increased investor appetite for government securities and Primary Dealership (PD) reforms,” said Capital Markets Authority (CMA) in the bulletin.
On an annualised basis, CMA explained that the government bond turnover on the secondary market has increased by 31.7 percent from Shs12.3 trillion in the second quarter of 2021 to Shs16.2 trillion in the period under review.
Going forward, the CMA said the capital markets are projected to be weighed down by a reduced appetite for frontier markets driven by an increase in interest rates in the developed markets such as the United States of America.
The CMA said frontier markets such as Uganda might take huge hits because investors, particularly foreigners, get attracted to the western bonds and equities that are viewed as safe havens in times of global uncertainty.
In addition, the appreciation of the dollar against global currencies including the Uganda Shilling, coupled with imported inflationary pressure in Uganda fuelled by the increase in the price of crude oil and global supply chain constraints could reduce the inflows into the local capital market. On a positive note, the market remains upbeat with the expected listing of Airtel Uganda and Lyca Mobile in the not-so-distant future.