Some fixed income traders expect the paper's weighted average yield to remain around the 21.85 percent seen at last month's sale, its highest ever level at auction.

"Trading activity has been low this morning and I think the market is waiting to see the results of the auction," said Denis Mashanyu, a trader at Standard Chartered Bank.

Stanbic Bank Uganda said in a market report it expected decent foreign interest in the debt sale.

"(This) in turn is expected to support the shilling."

The central Bank of Uganda (BoU) is selling 95 billion shillings ($38.1 million) worth of the two-year Treasury bond.

At 0940 GMT commercial banks in Kampala quoted the local unit at 2,484/2,494, marginally stronger than Tuesday's close of 2,490/2,500, unchanged from Tuesday's close.

Tight shilling liquidity brought about by a sharp tightening of monetary policy in past months and year-end tax payments by large firms were likely to keep the local currency on a strong footing against the dollar, Mashanyu said.

After plummeting to a historical low of 2,901 against the dollar on Sep. 23, the currency of one of Africa's top coffee producers has rebounded strongly on the back of a four-month policy tightening run.