How To Invest In Government Securities (Treasury Bonds & Bills) In Kenya | Complete Guide
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If you ever wanted to invest in Government securities, this article is for you. For many years, government securities (treasury bonds and bills) have remained a preferred investment option for most passive and risk-averse investors, because they have fixed returns, are risk-free, and are highly liquid.
When you invest in such securities, you are loaning the government your money, which is repayable after a certain period, often referred to as maturity.
The process of investing in government securities is simple and straightforward. You can undertake this process through an investment bank, commercial bank, or directly through the Central Bank. compact as loans to the
So, what are treasury bonds and bills and how can you invest in treasury bonds and bills in Kenya?
Keep reading to learn more.
Government Securities – Investing in Treasury Bonds and Bills in Kenya
The National Treasury provides two types of government securities – Treasury Bonds and Treasury Bills.
Probably you have heard these two terms –Treasury Bonds and Treasury Bills but are not sure what they mean.
Let’s break these two terms further.
What Are Treasury Bills?
Treasury bills are a form of short-term investment –maturing within 91 days, 182 days, or 364 days. The implication is that once you invest in any available treasury bill, you are entitled to repayment after three months, six months, or a year. Usually, the maturity depends on the bill you have invested.
So, how can you make your money by investing in Treasury Bills?
Simple, all the Treasury Bills are offered at a discounted price. For instance, once you invest in a 182-day Treasury Bill, you get it at a lower value than its face value, yet at maturity, you are paid its full face value.
You are probably wondering; what is the minimum amount needed to purchase a Treasury Bill? The minimum amount of money you can spend in purchasing a Treasury Bill is ksh100,000.
What Are Treasury Bonds?
Unlike the Treasury bills, bonds are medium to long-term investments, with a maturity period ranging from one year to 30 years. Usually, you will receive interest from your investment throughout the specified period, after which you will get your invested amount in the bond’s face value.
You will need a minimum of kshs50,000 to purchase a Treasury bond in Kenya.
Who Can Invest in Government Securities?
The largest investors of government securities are pension schemes, corporate identities, and commercial banks. However, you can invest in treasury bonds and treasury bills directly through commercial banks or the Central Bank.
To invest in government securities, you must:
- Have a CDS account with the Central Bank of Kenya
- Have a bank account with any commercial bank in Kenya
- Have the minimum amount required to purchase (ksh100,000 for treasury bills and ksh50,000 for treasury bonds)
Frequently Asked Questions about Investing in Government Securities
The largest investors of government securities are pension schemes, corporate identities, and
Q1. Can I Invest in Government Securities when Abroad?
As a Kenyan leaving abroad, you can invest in treasury bills and bonds provided your Kenyan bank account is still active. All you need is open a CDS account, fill out the required forms, and submit them via email to the Central Bank.
Q2. I am not a Kenyan, Can I Invest in Government Securities?
Investing in government securities is still possible for non-Kenyan investors. In such a case, you will need a nominee of a local stockbroker, an investment bank, or even a commercial bank.
Q.3 Can I Access my Funds before Maturity?
If for any reason you want to redeem your securities before maturity, you will be required to rediscount them. Usually, the Central Bank buys your securities back, but often at a significantly low rate. Such punitive rates are adopted as a measure to ensure that all investors allow their securities to mature.
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