Part of our “Diversify” series.
Treasury bills and bonds are floated by the Central Bank of Kenya (CBK) over a fixed period of time to fund government expenditure infrastructure projects or even the recurrent budget shortfalls. Compared to bills and bonds floated by the United States treasury, the rate of return of those issued by CBK is high (at one point was at 21%), making them a lucrative buy for those looking for higher returns but lower risk. Even at current 10% return CBK treasuries are outdoing many of our 401(k)s here in the US.
Treasuries have long been considered a safe investment by those seeking to avoid more volatile and riskier investments such as stocks. To invest in treasury bills and bonds in Kenya, one needs to open a Central Depository System (CDS) account directly with the CBK or through a banking institution or an investment broker. There are no transactional fees or opening balance requirements if one directly opens the CDS account with the Central Bank.
However, at this time CBK requires Kenyans in the Diaspora to have an existing account with a commercial bank in Kenya in order to directly open a CDS account with CBK. In the case where one does not have such an account, CBK requires them to open a CDS account through an authorized CBK agent which includes commercial banks.
For those in the Diaspora, opening a CDS account through your commercial bank is the better alternative because many banks will allow you to directly link your existing banking account with a CDS account in addition to guiding you through the process of opening the CDS account. However, there might be transaction fees incurred with transferring funds between your accounts or an opening balance requirement.
A CDS account is more like of a multi-purpose account since it can also be used to trade stocks in the Nairobi Stock Exchange (NSE).
For short-term investment, treasury bills are floated for 91, 182 or 364 days.
For long-term investment, treasury bonds are floated for periods between 1 year and 30 years.
The Central Bank of Kenya provides a step-by-step guide (PDF) to opening a CDS accounts for Kenyans in the Diaspora.
For more information, please visit the Central Bank of Kenya treasury bonds webpage.
Capital FM article (Oct 2015) – Here’s why you should invest in Treasury Bills.
investing.com – Kenya Government treasury bonds yield curve.
Daily Nation (Dec 2016) – Muted T-bills uptake as investors eye premium fetching 2-year bond.
By money254.com staff – November 10, 2016
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