The Safest Investment for 2025: Everything You Need to Know About Treasury Bonds

As 2025 begins, many are looking for smart, secure ways to grow their money. Treasury bonds offer one of the safest investment options available, making them a perfect choice whether you’re new to investing or already building your portfolio.

On January 8, 2025, the government of Uganda, through the Bank of Uganda, will auction 2-Year, 5-Year, and 15-Year Treasury Bonds. Here’s why you should consider investing and how to get started.

What Are Treasury Bonds?

Treasury bonds are long-term loans you give to the government in exchange for regular interest payments (called coupons) and a guaranteed return of your full investment at the end of the bond’s term.

They are:

• Safe: Backed by the government, they’re one of the lowest-risk investments available.
• Predictable: You know exactly when you’ll receive interest payments.
• Flexible: With options like 2, 5, and 15 years, you can choose a bond that fits your financial goals.

The Bonds on Offer

2-Year Bond (UG12G0907265)

• Coupon Rate: 13.5%
• Withholding Tax: 20%
• Maturity Date: July 2026
• Why It’s Attractive: Perfect for short-term investors who want safe returns in just two years. The last auction for this bond had a cut-off yield of 15.75%, which means strong potential for good returns.

5-Year Bond (UG0000001533)

• Coupon Rate: 14.25%
• Withholding Tax: 10%
• Maturity Date: August 2029
• Why It’s Attractive:
  • Originally issued as a 15-year bond in 2014, it’s been reopened as a 5-year bond for this auction.
  • Last auctioned at a 16% cut-off yield, offering solid medium-term returns.
  • Bonus: It pays interest every February and August, making it ideal for diversifying your cash flow if you already have bonds paying at other times.

15-Year Bond (UG12K2306393)

• Coupon Rate: 15.8%
• Withholding Tax: 10%
• Maturity Date: June 2039
• Why It’s Attractive:
  • Long-term growth for patient investors, with the highest coupon rate in this auction.
  • Last auctioned at a 16.75% cut-off yield, making it one of the most attractive options for long-term wealth-building.
  • Special Opportunity: If you invest on January 8, you’ll receive your first interest payment the very next day (January 9, 2025). That’s a rare chance to start earning income immediately.

Why Treasury Bonds Are Perfect for 2025

1. Reliable Income: With coupons paid every 6 months, Treasury bonds provide steady, predictable cash flow.
2. Risk-Free Returns: Government-backed bonds are among the safest investments you can make.
3. Flexibility: With options ranging from 2 to 15 years, you can align your investments with your financial goals.
4. Tax Efficiency: Withholding tax rates of 10%-20% are manageable, leaving you with strong net returns.

Example: How a 15-Year Bond Works

• Investment: UGX 100 million (face value).
• Purchase Price: UGX ~97 million (at a discount, based on yields).
• Annual Coupon (Pre-Tax): UGX 15.8 million.
• Net Annual Coupon (Post-Tax): UGX ~14.22 million.
• First Payment: January 9, 2025.

This makes it an excellent option for those seeking long-term, low-risk growth.

How to Participate

Investing in Treasury Bonds is straightforward:

1. Choose Your Option: 2, 5, or 15 years.
2. Place Your Bid:
   • Non-Competitive: Start with as little as UGX 100,000.
   • Competitive: For larger investments, the minimum is UGX 200 million.
3. Work With a Primary Dealer Bank: Banks like Stanbic, ABSA, Equity, and others are approved to process bids.

Key Dates to Remember

• Auction Date: January 8, 2025
• Settlement Date: January 9, 2025
• First Coupon Payment: January 9, 2025 (for the 15-year bond).

Final Thoughts

If you’re new to investing, Treasury Bonds are the perfect way to start. They’re safe, predictable, and provide consistent returns, whether you’re looking for short-term gains or long-term growth. With the first auction of 2025 just around the corner, now is the time to act.