Issued bond certificate

How to Invest in Treasury Bills and Bonds in Kenya

For the longest time, I wanted to invest in Government treasury bills and bonds. But I considered myself a layman, what did I know? The big imposing building that is the Central Bank of Kenya (CBK) did not serve to calm my nerves.

So, I held out, waited and then waited some more… and finally, I thought to myself if others can buy and invest directly with CBK, surely so could I! Consequently, sometime in 2014 I decided to do some research and jump right in with the rest of the people investing in Government securities.

Before we get ahead of ourselves, what are Treasury Bills and Bonds?

Treasury Bills and Bonds are financial instruments, used by Government through the Central Bank of Kenya, to raise funds. Loosely described, it is the Government borrowing money from the public.

Usually, the Government will do this to assist it to meet budgetary deficits or enable it to undertake capital projects that need extra budgetary support.

What is the difference between Treasury Bills and Bonds?

  1. The main difference between Treasury Bills (T-Bills) and Bonds (T-Bonds) is the Tenor i.e. Bonds are longer-term (above 1 year) while Bills are short term (1 year and below).
  2. The minimum investment amount is Kshs. 100,000 while for the Treasury Bonds the minimum investment amount is Kshs. 50,000.

The exception in infrastructure bonds where the minimum investment amount is Kshs. 100,000

These financial instruments are generally secure because, in essence, you are lending to the Government.

Registration & CDS account opening

We resume my journey…… I had to get a mandate card from the Central Bank (CBK) fill it and then return it, duly filled and signed. On the card, there are certain provisions where your local bank needs to fill and sign, and so I submitted the same to my bank branch and they signed (has provision for 2 signatories) and certified my passport photo (at the back), as a true image of me.

This was to satisfy the CBK that I have a bank account with the said bank.

Once I was done and armed with my original Identity Card (I.D) I went back to the now-not-so-imposing building and submitted my documents.
Since they were in order, I was told they would get back to me in the next 7 working days via email.

I guess that time allowed them to do their due diligence and get the required internal approvals.

After the said time, I received an email from the National Debt Office, it started with “Dear investor” (it felt really good to be identified as such…) giving me details of my new CDS number and a Virtual Account number, with instructions on how to use both.

Typing on computer

Investing in treasury bills and bonds as an individual

So how was I going to invest?

I had to do some more research…Every week CBK has auctions for T-bills for different tenors i.e. 91 day, 182 day and 364 day. How you participate is by downloading the form from the CBK website, fill it in and ensure you submit back within the timelines given, to participate in the auction.

The process used to require you to physically submit the form, however, CBK currently has provision for electronic submission. Currently, the bids will usually be submitted by Thursday 2 p.m. and then the auction results are announced the following day.

For the T-bonds there is usually a Bond sale once a month, and the procedure largely remains the same. Back then, the forms to be filled used to be different, for T-bills and T-bonds, however, CBK has since harmonized them and you just need to fill out as appropriate. From CBK’s website, the bids should be submitted by Tuesday 2 p.m. on the last week of the Bond’s sale.

The dates the T-bills and bonds are on sale will usually be put in the daily newspapers, so always look out for the details there and also on the CBK website itself.

Back to my experience, I went to the CBK website and downloaded the form for bidding. And since I was a novice, I decided I will first invest Kshs. 50,000 only, which meant I had to invest in T-bonds as that was the minimum investment amount.

I filled in the form and physically took it to back CBK and dropped it in one of the boxes provided for T-bond bid forms. On the day the auction results were out, I called the National Debt office to confirm whether my bid was successful and what were the necessary details needed for me to give to my bank to effect the transfer of the money. These I was given with instructions to pay the amount by the following week on Monday at 2 p.m.

Return on Investment

Although the CBK will usually float both financial instruments at a discount, Treasury Bonds and Bills are different in the way you receive your return.

For T-Bills, the discount rate is factored upfront so that you pay a discounted amount at the beginning of the investment period and you receive the face value of the Bill upon maturity.

In the case of T-Bonds, the interest is received periodically, usually semi-annually. The details of the payment dates are usually given in the prospectus for each bond sale, on the CBK website.

Both the principal and interest amounts are sent directly to your bank account.

In case you are in the diaspora and you want to invest, the process will likely be different. Check the CBK website which is information-rich and you will be sorted.

Secondly, please find the full list of mandatory requirements for opening the CDS account here.

So really there is not much to the process, and as earlier stated this investment avenue is generally secure as you are lending to the Government itself. The interest rates have remained attractive over time.

Investing in treasury bills and bond through an investment fund

In case you are very interested in T-bills and bonds but you still feel intimidated by the process described above, then I strongly recommend investing through a Bond Investment fund.

Some advantages of investing through the Bond Fund are;

  • They are run by professionals such as fund managers who study the market and are able to bid and obtain very competitive interest rates.
  • Trading in the  bond secondary market which means the fund benefits from buying low and selling high
  • Bond funds are also more flexible, especially if you don’t want to hold on to a bond to maturity.
  • There is no restrictions to stick to the minimum of Kshs. 50,000 or Kshs. 100,000

I would personally recommend the ICEA Lion Bond Fund

They have excellent customer care and are responsive whenever you need information.

Check out the ICEA Lion Bond Fund today and let me know your experience.

In conclusion, I will soon touch a bit on the technical part of investing in Government securities, Taxes and why Infrastructure bonds are my personal favorite.

Have you invested in Treasury Bills or Bonds? Please share your experience…

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26 thoughts on “How to Invest in Treasury Bills and Bonds in Kenya”

    1. Thanks Dennis for your enquiry, Bond interest is typically paid twice a year. The amount will usually be sent to your bank account.

    1. Hi Eunice , the Central Bank of Kenya has a branch in Mombasa, to find out more on how you can invest in treasury bills and bonds. Their website is also loaded with useful information.

    1. Hi Nicholas,
      They are not necessarily different, it is just in the case of investing directly with CBK, then you take on the whole hustle of investing on your self and of course you receive all the returns . If you invest through a trust fund then that hustle is transferred to a third party , at a fee.

      1. Hii..this fee charged by the fund manager or the experts is it once a year or every time I put forward….an order example I want to so Tbills….how will I pay the fee is it once a year or every 91 days my fee is out I have to pay another fee when am making another 91 day order

    1. Hi Nelly, I can only infer from the kind of identification documents required, that an investor needs to be at least 18 years.

  1. Can I pay via rtgs for less than 1m for t-bill? How do i use tmd? What is the virtual account for? I had to physically go to a bank to do an rtgs. I’d appreciate info on tmd, virtual account, ways of paying for TBILL, when will cbk respond once I make payment and what comes next

    1. Thanks Debbie for your comment. It is possible to pay via RTGS for less than 1M you only need to instruct your bank to do so. For TMD, you have to fill in a form in the CBK website and then submit it to CBK with the required details. Thereafter you will be receiving communication via text from CBK. At the point of making payment to CBK for TBill or Bond you will need to quote your virtual account number.

      Making Payment to CBK is usually dependent on what your bank offers, if you can do online transactions then you dont have to walk to your bank to do the transfers, so check with your bank.

      Lastly, at the time the CBK offers T bills or bonds it usually, puts all the information on the brochure so i’d encourage you to read through and see the payment terms.
      id be happy to go through with you if you have a specific one.

  2. Hi Frank, It is purely dependent on the Government’s needs especially in meeting its infrastructure budget. However in my experience i think there are usually at least 4 infrastructure bonds in a year.

  3. Hi Frank,
    Infrastructure bonds are usually auctioned based on the Governments need to meet its infrastructure budget. But in my experience i noticed that there are usually at least 4 infrastructure bond offerings in a year.

  4. I would like to get more information about the gvnt. Bonds I will like to invest on it . Should I need to go to the cbk or can I get assistance from the cyber.
    I’m new for this.

    1. Hi Mary, The CBK pays interest twice a year only. However mutual funds/ unit trusts can come in handy to give you a monthly income.

    1. Hi Jimmy, the CBK doesn’t usually have set months or dates when they float infrastructure bonds. But remember you can always purchase from the secondary market. Talk to your broker and they should be able to advice

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