Treasury Bills & Bonds 101: A Beginner’s Guide to Investing in Government Securities

Investing in treasury bills and bonds is one of the safest ways to grow your money in Uganda. Whether you’re saving for a short-term goal or planning for long-term growth, understanding how treasury bills (t-bills) and treasury bonds (t-bonds) work is an essential first step.

What are treasury bills & bonds?

Treasury bills and bonds are government securities issued by the Bank of Uganda to raise money to fund national budget programs. Think of it as lending money to the government, which then pays you back with interest.

Key features

• With treasury bills you receive interest once the tenor (91, 182 or 364 days) expires, along with your initial investment amount.
• With bonds, you receive interest twice a year through payments called coupons (paid every 6 months) and receive your principal back at maturity of the bond. You pay withholding tax on your interest; typically, 20% for investments below 10 years, and 10% for those above 10 years.

Why invest in treasury bills and bonds?

Investing in t-bills and t-bonds comes with several advantages:

✅ Low risk:  backed by the Government of Uganda
✅ Fixed returns:  you know your earnings upfront
✅ Flexible terms  you can choose  whether to invest short or long-term
✅ Help you beat inflation: T bills and bonds offer  relatively high interest rates, which means your money grows faster than if it were just sitting in a regular  bank account

 How to invest in bills and bonds

Step 1: Open a central security depository (CSD) account

This account is mandatory for investing in treasury bills or bonds.

• Where: Through a commercial bank that is a primary dealer, or via an investment advisor/stockbrokerage firm licensed by the Capital Markets Authority.
• Requirements:
• Ugandan bank account
• Completed CSD account opening form
• Valid ID
• Passport-sized photo(s)

Step 2: Fund your investment account

• Transfer funds to your bank account.
• Your bank will debit this account when placing a bid.

Step 3: Place a bid

There are two avenues for this:

a.       Primary market (auctions): Where new government securities are issued.

• T-bills: Every 2 weeks
• T-bonds: Every month

Your bank /brokerage firm will help you to submit the bid to the Bank of Uganda and will advise on current interest rates and cut-off yields.

b.      Secondary market: Existing investors can sell securities to other investors.

Step 4: Monitor and receive returns

• T-bills:  you receive your interest at maturity along with your principal
• T-bonds: Interest is paid semi-annually; and the principal paid back at maturity.
• Funds are credited directly to your bank account.

For diaspora investors

• Physical presence in Uganda is not required: only a Ugandan bank account is necessary
• Keep email and phone contact active for updates.

Before you invest, whether in t-bills and bonds or any other investment keep these tips in mind:

1.       Keep learning and stay informed. Track your investments, read about market trends, and understand exactly what you are investing in.

2.      Stay invested and be consistent. Even small, regular investments grow over time thanks to compounding. Avoid the temptation to pull out and jump onto the next thing. Also reinvest your interest so as to benefit from compounding.

3.      Be Patient: Growth doesn’t happen overnight. As they say, investing is a marathon, not a sprint. Resist the urge to chase quick wins or jump from one investment to another.