How To Invest In Treasury Bonds & Bills In Kenya

Bonds have been a go-to investment option for most passive and risk-averse investors due to their risk-free nature, fixed returns, and high liquidity. Did you know that bonds are the 2nd most liquid asset class after cash? Liquidity basically means the ease with which an asset, or security, can be converted into ready cash without affecting its market price. The National Treasury recently floated a 14-year Infrastructural Bond (IFB1/2022/14) seeking to raise Sh60 billion, which fetched a coupon payment rate of 13.9%. The IFB was oversubscribed having received bids worth Kes 91.8 billion, mainly due to the tax-free nature of IFBs as provided for under the Income Tax Act. Let’s now learn more about Bonds & Bills. Ready?

What is a Bond?

A bond is a debt security where the bond issuer (the borrower) issues the bond for purchase by the bondholder (the lender). It is also known as a fixed-income security, as a bond usually gives the investor a regular or fixed return. When you invest in a bond, you are essentially lending a sum of money to the bond issuer. In return, you are usually entitled to receive interest payments at scheduled intervals; and capital repayment of your initial principal amount at an agreed date in the future also known as the maturity date.

Who are the typical Bond issuers?

Typical bond issuers include:

Governments/Government agencies (Treasury)


Non-bank financial institutions


What is the difference between Treasury Bonds & Treasury Bills?

To understand the difference between the two, we need first to define Government securities. Government securities are considered risk-free investments. Government securities provide you with a return and/or a consistent source of income over a specified period of time. Investors who buy these securities are loaning money to the government, which promises to repay those investors after a specified period of time, called maturity.

Investing in government securities in Kenya is a simple process that you can undertake directly through the Central Bank directly or through a commercial bank or an investment bank.

In Kenya, the National Treasury offers two types of government securities: Treasury bonds and Treasury bills.

Treasury bonds

Treasury bonds are secure, medium to long-term investments that typically offer you interest payments every six months throughout the bond’s maturity. The Central Bank auctions Treasury bonds on a monthly basis but offers a variety of bonds throughout the year. Their maturity can range from one year to 30 years. There are many different types of Treasury bonds, but their basic operations are similar.

Basically, Investors buying Treasury bonds are loaning the government money for a specified period of time, which is the bond’s maturity. With most bonds, investors will receive interest payments every six months throughout that period of time, and at the end of that period, they receive the face value amount that they invested.

What is the minimum amount you can invest in Treasury bonds in Kenya?

If you’d like to purchase a Treasury bond in Kenya, you must invest a minimum of Ksh 50,000.

How Do I Determine my Return on a Treasury Bond?

For ease of calculating prices, the Central Bank includes a yield table in the prospectus for the T/bonds on offer. One can also use the Treasury bonds pricing calculator available on the CBK official website.

How do you decide on how you want to invest in Treasury Bonds?

Treasury bonds are offered for a set number of years, ranging, from one to 30. When choosing a bond to invest in, you’ll need to consider what is available in the upcoming auction and how long of a commitment you want to make.

There are several types of bonds that are generally made available:

Most bonds auctioned by the Central Bank are fixed coupon Treasury bonds, which means that the interest rate associated with the bond will not change over the bond’s life, so semiannual interest payments from these bonds will stay the same.

Infrastructure bonds are used by the government for specified infrastructure projects. These bonds typically see a lot of market interest because returns from them are tax-exempt.

Zero coupon bonds are similar to Treasury bills, in that they are sold at a discount and do not have interest payments. They are also typically issued for a short period of time.

When you are ready to invest, you should begin monitoring the upcoming bond prospectuses available on the CBK website, to find the right opportunity for you. In the prospectus, you will find information about the different bonds on offer, including the bonds’ durations until maturity, or tenor, and the coupon rates. The coupon rate refers to the interest payments you will receive every six months.

How Do I know which Bonds are on Offer at any time?

Information about the Treasury bond(s) on offer every month is available in the Daily Nation Newspaper from the first or the second week of each month and also on the CBK official website.

Do I pay withholding and/or income tax on Treasury bonds?

Yes. Withholding Tax of 15% on Treasury bonds with tenors up to 9 years and 10% for Treasury bonds of tenors of 10 years or more is charged on the discount as well as periodic interest payment, unless an investor is tax-exempt, in which case a tax exemption certificate must be provided or the investor has made arrangements to pay the tax directly to the Kenya Revenue Authority (KRA). However, discount and interest earnings from infrastructure bonds as defined under CMA and KRA Acts do not attract any form of tax.

When Do I Make Payment for a Treasury Bond and Where?

Investors can call or visit the Central Bank a day after the auction date to know how much to pay the Central Bank, not later than 2.00 pm on the following Monday, provided it is a working day. A successful bidder must pay the total amount given to him/her by 2.00 pm on the value date, usually on Mondays. If that Monday is a holiday the payment period is extended up to Tuesday at 2.00 p.m. Any Investor who defaults in payment may be suspended from participating in future auctions for some specified period.

Payments can be made in Cash or Bankers cheques for amounts less than Ksh 1 million, Direct debits (for banks only) or one can also rollover of funds from matured securities. Amounts equal to or more than Ksh 1 million can only be paid by electronic transfer through the Real Time Gross System (RTGS) known as the Kenya Electronic Payment and Settlement System (KEPSS) through commercial banks.

During payment, the following details are required: Name, Reference Number, CDS account Number (also called Portfolio Number), and Virtual Account Number when using RTGS. The term real-time gross settlement (RTGS) refers to a funds transfer system that allows for the instantaneous transfer of money and/or securities. The account to be credited is the Customer’s Virtual Account Number.

After payment, Investors receive a statement showing their holdings in the Central Depository (CDS) registry at the Central Bank.

What Happens When my Treasury Bond Mature?

The Central Bank remits electronically, the face value of maturing bond directly to the investor’s commercial bank account on the due date. The investor’s CDS account is debited by the same value as the security, and statements are sent to the investor showing the new position. Investors may however choose to roll over their security into a new forthcoming issue and in this case, they have to complete the application form giving rollover instructions, and submit it to Central Bank, before the closure of the period of sale for that bond, at 2.00 p.m.

Are Treasury bonds Tradable in the Secondary Market i.e. (the Nairobi Securities Exchange – NSE)?

YES. Treasury bonds are traded at the Nairobi Securities Exchange (NSE). In addition, investors may pledge them as collateral security against credit facilities (loans), and may also be transferred among holders of CDS accounts. CDS Statements are adjusted accordingly to reflect these transactions. Commercial banks also use them as collateral for liquidity management through Repurchase Agreements (Repos) and Intraday Liquidity Facility (ILF).

Contact Mike Gitonga – Bonds Agent at AIB-AXYS Africa for all secondary market bond trading services.

Email: Tel no. +254726748922/ +254787786569

Follow this step-by-step guide to investing in Treasury bonds through the Central Bank:

1. Open a CDS Account

The first step to investing in Treasury bills is to open a CDS account with the Central Bank. It is free to open these accounts, which is how the Central Bank keeps track of who holds which government securities. Once you have your CDS account, which can be opened for an individual or a corporate body, you can invest in multiple Treasury bills and bonds, so you only need to complete this step the first time you’re investing.

To open a CDS account, you need to hold a bank account with a Kenyan commercial bank. You can collect a mandate card from the Central Bank or any of its branches, and must fill it out in neat block letters. You’ll need to provide contact information and information about your commercial bank account. You’ll also need to have two signatories from your commercial bank sign the card to verify the information you’ve provided.

You can find sample mandate cards HERE.

When submitting your mandate card, you also need to submit a passport-sized photograph of yourself, which has to be certified and stamped by a representative from your commercial bank.

Finally, you’ll also need to submit a clear copy of your National Identity Card, passport, or alien certificate.

2. Complete and Submit an Application Form

When you are ready to invest, you need to complete a Treasury bond application form.

This includes information about the Treasury bond you want to purchase, like the issue number, the duration, and the face value amount you want to invest. It also includes information about yourself, including your name, telephone number, CDS account number, commercial bank account number, and whether the funds you are investing are coming from a local or offshore source.

On the application form, you have two options for selecting a rate, which is the percentage of your face value investment that you will receive in semiannual interest payments. If the bond has a pre-determined coupon rate in the prospectus, you should choose Non-Competitive/Average Rate. If the prospectus says that the coupon rate is market-determined, you can select either the Interest/Competitive Rate or the Non-Competitive/Average Rate.

Investors choose the Interest/Competitive Rate bid on the bonds by submitting the coupon rates they would like to have for that bond. The Central Bank then decides what bids it will accept and, using an average of those rates, determines what rate the Non-Competitive/Average Rate investors will receive.

The final section on the application form is the Rollover Instructions. To easily facilitate re-investment, investors with maturing bills and bonds can use their returns to purchase further government securities.

You can find a sample Treasury Bond Application Form HERE.

The bond prospectus will include the dates of the bond’s sale period. You must submit your application form to the Central Bank’s head office or one of its branches by 2 pm on the Tuesday of the last week of the bond’s sale period.

3. Getting the Auction Results

The Central Bank’s Auction Management Committee (AMC) meets at 4 pm on auction days and, after considering all received bids, determines the cut-off rate and the weighted average of the accepted bids for market-determined coupon rate bonds. The results from the auction are published, through Treasury Mobile Direct (TMD), CBK Twitter page, and the statistics section on the CBK website. While investors will typically receive Treasury bonds in the amount they applied for, the Central Bank can issue bonds in a lower amount.

Following the auction, investors need to call or visit the Central Bank or its branches to determine if their applications were successful and to determine how much they owe for their Treasury bonds.

If you have submitted an application, it is extremely important that you contact the Central Bank to determine what your payment will be, as you will need to make that payment by 2 pm on the following Monday or, if that Monday is a public holiday, the following Tuesday.

4. Payment

The payment period for an auction typically closes on the following Monday at 2 pm. Investors can submit their payments, in the amounts specified when they contact the Central Bank, through cash or banker’s cheques for amounts under Kshs. 1 million and through a KEPSS transfer for larger amounts. Successful applicants who fail to submit payments within the payment period can be barred from future investment in government securities.

5. Maturity Proceeds

Upon investment in a Treasury Bond, the Investor will receive interest payment semiannually in their commercial bank account as indicated on the CDS account throughout the tenor of the Bond. On maturity, the investor will receive the last interest amount and the face value of the Bond. Alternatively, Investors may choose to roll over their security into a new forthcoming issue and in this case, they have to complete the application form giving rollover instructions, and submit it to Central Bank, before the closure of the period of sale for that bond. The maturity date of the maturing security (investment) and the value date of the new bond must match for the rollover instruction to be successful. The Bank, therefore, does not remit face value into the investor’s account but rather sends only refund amounts generated from new investment.

Let me now help you analyze a bond’s prospectus using the recently floated 14-year Infrastructural Bond (IFB1/2022/14). Ready?

Screenshot 854 1
Screenshot 853

There are some terms that you might find in a Bond’s prospectus that you might not understand so let me explain:

Note: A Prospectus is a disclosure document prepared by a bond issuer that gives detailed essential information about the issuer and the bond offering e.g., coupon rate, maturity date, etc.

The Redemption Structure tells you when When your principal amount will be paid. 

Bond amortization means the gradual or regular repayment of the face value (principal) and the interest on the bond in the course of its life.

Encumbered securities: these are bonds that have been used as collateral for a loan and therefore cannot be transferred to a new owner.

Now that you understand the meaning of the two, let’s get to the specifics:

When it comes to the naming of Bonds let’s say IFB1/2022/14:

The first part (IFB1) represents the type of Bond, so this one is an Infrastructural Bond and hence has IFB at the beginning. 2022 is the year that the bond was issued, and 14 is the time period to maturity i.e., 14 years. If it was a Fixed Coupon Treasury Bond, it would have (FXD1) at the beginning e.g., FXD1/2022/25Yr.

Tenor (Time Period):  14 Years

Redemption Date: 27th October 2036

Taxation: Tax-Free

Redemption Structure:

  • 4th November 2030 – 50% of the unencumbered outstanding principal amount.
  • 27th October 2036 – 100%, final redemption of all outstanding amounts.

So, what do the above terms mean in layman’s language?

Those who invest 1 million or less will get their FULL principal amount back on 4th November 2030.

In a nutshell, this is like an “8-year Infrastructure bond” for anyone who invests 1 million or less. Because you’ll get ALL your money back on 4th November 2030, it also means that will be the end of receiving interest payments.

This is great for retail investors most of whom put in amounts under 1 million. You get ALL your money back midway through the life of the bond to spend or invest elsewhere.

Those who invest more than 1 million will get back half of their principal amount back on 4th November 2030 and the other half on 27th October 2036.

Note: If you use your bond as collateral for a loan, the partial redemption won’t apply to you: you won’t get paid on 4th November 2030.

Additional Information

You might come across the word Tap Sale. What does this mean?

Tap sale is a procedure where the treasury opens the sale of bonds that had already been issued in the past. The bonds are issued at their original face value, maturity, and coupon rate but are sold at the current market price. Normally a tap sale is issued when a bond has underperformed hence not meeting the initial capital target set by the treasury. A good example is early this year in May when the Central Bank of Kenya sought to raise KSh10 billion from the reopening of two bonds that had underperformed in the first auction. The 10 and 25-year papers had raised Sh31.7 billion against the target of Sh60 billion. The underperformance came as a result of major investors pushing for higher rates, amid rising inflation and the weakening of the shilling against major world currencies.

The Central Bank of Kenya is pleased to offer eligible investors an opportunity to participate in a tap sale of the above-fixed coupon Treasury bonds whose details are as in the prospectus issued value date 16/05/2022. The tap sale will be offered on a first-come-first-served basis,” the CBK said in a notice.

Treasury bills

Treasury Bills, are a short-term investment offered every week, with maturities of 91 days, 182 days, and 364 days. This means that if you invest money in a Treasury bill, you will receive that money back within three months, six months, or one year, depending on the bill you choose.

Investors make money on Treasury bills because they are sold at a discount. For example, if you invest in a 91-day Treasury bill, you will pay less than the bill’s face value, but after 91 days you will receive the full face value.

What is the minimum amount you can invest in Treasury Bills in Kenya?

If you’d like to purchase a Treasury bill, you must invest a minimum of Ksh 100,000 which must be invested in denominations of Ksh 50,000.

How do I choose the Maturity Length of the Treasury Bill I want to invest in?

You should decide on a maturity length based on the recent interest rates, which can give you an idea of what to expect in upcoming auctions, and based on how long you can commit your funds.

How Do I Determine my Return on a Treasury Bill?

Investors can use the formula provided by the CBK which is already inputted in the Treasury bills pricing calculator on the Central Bank website.

What Happens When my Treasury Bills Mature?

The Central Bank remits electronically the face value of maturing bills directly to the investor’s commercial bank account on the due date. The investor’s CDS account is debited by the same value of the security and statements are sent to the investor showing the new position. Investors may, however, choose to roll over their securities into a new forthcoming issue and in this case, they have to complete an application form giving rollover instructions and submit it to the Central Bank before the set deadline specified in the results of the preceding auction.

Can I Trade my Treasury Bill in the Secondary Market i.e. (the Nairobi Securities Exchange – NSE)?

No. Treasury Bills are not traded at the Nairobi Securities Exchange. However, investors may pledge them as collateral security against credit facilities (loans), and may also be transferred among holders of CDS accounts. CDS Statements are adjusted accordingly to reflect these transactions. Commercial banks also use them as collateral for liquidity management through Repurchase Agreements (Repos) and Intraday Liquidity Facility (ILF). It is however important to note that the non-listed 364-day Treasury bill is tradable Over the Counter (OTC) with transactions processed at the CBK.

Who can Invest in Treasury Bonds & Treasury Bills?

While commercial banks, corporate entities, and pension schemes are some of the largest investors in government securities, individuals can invest directly through the Central Bank. If you’re interested in investing in government securities you must have a bank account with a commercial bank in Kenya, and you must open a CDS account with the Central Bank. Kenyans and foreign investors who meet these qualifications are free to invest in government securities directly with the Central Bank. Those who do not wish to open a CDS account with the Central Bank can still invest by opening a client account with their commercial bank, which will invest on their behalf. However, while opening a CDS account is free, commercial banks typically have fees associated with client accounts. Kenyans living abroad can invest in government securities as long as they have an active Kenyan bank account. They can open a CDS account and submit all required forms to the Central Bank via email. Investors who are not Kenyan and are not Kenyan residents can invest in government securities but must do so as a nominee of a local commercial bank, an investment bank, or a stockbroker.

N/B – To bid for Treasury Bonds &Treasury Bills Application Forms are available on the CBK website. Print the form, ensure that all the required fields are properly filled in, then scan the completed form and email it to

Can I access my funds before the maturity date?

Investors who need to redeem their securities before they mature can rediscount those securities as a last resort. The Central Bank will buy the securities back, but do so at a punitive rate to discourage investors from doing this, and recommends that investors hold their securities until maturity if at all possible. This process is known as Rediscounting.

Treasury bond rediscounting avails funds to Bond investors who may wish to recall their investments before maturity and at the same time have failed to secure a buyer of the same in the secondary market. It is available at CBK as a last resort.

A letter is required from the Nairobi Stock Exchange together with the following documents: CDS statements, a photocopy of the identity document, a pay-in slip, and a certificate of incorporation in case of companies.

Treasury bills rediscounting avails funds to Treasury bills investors who may wish to recall their investments before maturity. It is a last-resort facility. To rediscount, a Treasury bill, send a written request to the Bank with the following documents: CDS statements, a photocopy of the identity document, pay-in slip. For a company, a letter of incorporation is required. The investor submits a duly filled sale confirmation form.

Where do I find Treasury Bills and Treasury Bonds on offer?

All Government securities on offer are available on the Central Bank of Kenya official website.

If I Buy a Treasury Bill or Bond, Can I Access my Funds before Maturity Date?

Yes. One can exit Treasury Bonds through trading at the Nairobi Stock Exchange or transfer to other parties through licensed stock brokers or rediscounting at the Central Bank.

Treasury Bills on the other hand may either be transferred or rediscounted at Central Bank or in the case of the 364-day Treasury bills, traded Over The Counter.

What makes Treasury Bonds & Bills an attractive investment for investors?


Treasury bonds & Bills are units of government debt, meaning that you are investing in the Kenyan Government which promises security for your investment.

Higher returns than bank deposits

Treasury Bonds & Bills typically pay a higher yield (return) than bank deposits of a similar term.

Regular Returns

Most Treasury bonds carry semi-annual interest payments, allowing investors to receive returns every six months. On the other hand, Treasury Bills are short term so you will receive your returns within three, six, or 12 months.


The Central Bank auctions several different types of Treasury bonds & Bills, enabling investors to find investments that fit their needs.

Auctioned Monthly & Weekly Respectively

Treasury bonds are auctioned every month, providing ample investment opportunities for diverse financial needs. On the other hand, Treasury bills are auctioned each week, providing consistent investment opportunities.

Hedge against inflation

With proper Treasury bond or bill selection, you may potentially earn an investment return that keeps pace with or even exceed the inflation rate.

What are the risks involved when investing in Treasury Bonds & Bills?

Treasury Bonds & Bills are considered safe investments however some of the risks involved include:

Interest rate risk

Interest rates and bond prices are inversely related. Should interest rates rise, the price of your bond will tend to fall (and vice versa). The longer the time to maturity of a bond, the greater the interest rate risk.

Liquidity risk

This is the risk of having to sell a bond at discounted prices due to the lack of a ready market or buyer.

Sovereign risk

Payment of the Treasury bond or bill may be affected by the political and economic events in the country.

I have a CDSC Account with a Stock Broker; can I Use it to Purchase Treasury Bonds and Bills?

No. To invest in Treasury Bills/Bonds, one must open a CDS account at the Central Bank of Kenya. The Central Depository for Securities Account (CDS) at the Central Bank differs from the one operated by the stock brokers.

Who Can Open a CDS Account and are there Any Charges?

Individuals, Commercial Banks, Non-bank Financial Institutions (NBFI‟s), Parastatals, Cooperative societies, Pension funds, Trust companies, Insurance companies, and registered societies are free to open Central Depository for Government Securities Account (CDS) at CBK. Foreign citizens can invest in Treasury bills/bonds through nominee accounts with commercial banks or investment banks. There are no charges for opening and maintaining a CBK-CDS account but one must operate a Commercial bank or an NBFI account as a prerequisite.

What is the Difference between Treasury Bond and Corporate Bond?

Treasury bonds are issued by the Government to raise funds for financing budgetary deficits while corporate bonds are issued by corporate entities to finance capital projects and enhance their balance sheets.

What happens when an investor passes away before all of his or her investments mature?

This calls for a Third-Party Claim. If an investor passes away before all of his or her investments mature, third parties can claim that investor’s outstanding securities by submitting documents establishing that they should be the bona fide recipients of the securities.

What are proceeds from the Issuance of Government Securities used for?

Proceeds are used by the Government to finance budgetary shortfalls. The borrowing target is usually set at the beginning of the financial year by the National Treasury and approved by the National Assembly.


Kenyan Wall Street



Leave a Reply

Your email address will not be published. Required fields are marked *