The Uganda shilling was relatively stable, trading in a narrow range as mid month corporate tax payments kept market activity at a low ebb during the week ending 16th February 2018.
Trading was in the range 3620/3630. In the interbank money market, overnight funds were priced at 8.50% while one week funds were at 9.50%.
In the fixed income market, a Treasury Bill auction of 160 billion was held. Yields having hit record lows, began a modest recovery with 91 day up, to trade at 8.416%, 182 day at 8.709% and 364 day at 9.326%, a few basis points above the CBR rate.
The CBR was reduced to 9%- the lowest level ever since the adoption of the inflation targeting in July 2011.
In the regional markets, the Kenya shilling was under pressure with low overnight borrowing rates in the money markets triggering demand for dollars. Trading was in the range of 101.10/30.
In the international markets, the US dollar saw a quick spike on the back of US CPI report but the strength was short-lived as markets went into an aggression to push back the greenback towards a three year low.
In the US bond market, yields were on the upward with a 10 year crossing the 2.9 percent while 2 year hit a 9 year high of 2.213 percent as the US economy moves deeper into a rising rate cycle.
“In the coming weeks, the shilling is likely to come under tension as corporates enter the dividend payment period, with position building ahead of March expected to exert pressure,” says Stephen Kaboyo an analyst and Managing Director at Alpha Capital Partners.