How to Invest in Treasury Bills in Kenya: A Complete Beginner’s Guide

What are Government Securities?

These are treasury bills and bonds that the government, through the Central Bank of Kenya (CBK), issues to the public to raise funds for day-to-day operations and development projects. Government securities are considerably safer investments to earn you passive income through consistent returns and preserve your money until maturity.

How do Treasury Bills Work in Kenya?

Treasury bills are short-term government securities with maturities of 91, 182, and 364 days. T-bills offer attractive returns depending on the months you choose to invest. ?

T-bills are sold at a discount. This means you pay less than the bill’s face value, but you receive its full amount on maturity. For instance, if you invest in a 182-day T-bill, you can pay 95,000 (depending on the average interest rate) but after the end of the sixth month, you get the bill’s full-face value of 100,000.

What is the Minimum Amount to Invest in Treasury Bills in Kenya?

The minimum to invest in T-bills is kshs.100,000. Also, you can only invest in multiples of 50,000 like 150,000, 200,000, or 250,000 in that order.

T-bills are auctioned weekly, specifically on Thursdays unless the day falls on a holiday, then it will move to the next day. These are the Treasury bills on offer this week.

Who can Invest in T-bills in Kenya?

Corporate entities and individuals living in Kenya and abroad can directly invest in T-bills via the CBK by opening a Central Securities Depository (CSD) account. Alternatively, you can invest in T-bills through commercial banks, investment firms, or stockbrokers.

If you do not wish to open a CSD account with the CBK, you can open a client account with the mentioned intermediaries, who can then invest on your behalf, but you will be charged a management fee.

What is CBK’s Dhow CSD?

Dhow CSD is the digital platform provided by the CBK for managing government securities. This is a recent innovation by the CBK that has simplified the process of investing in T-bills and bonds.

You can either navigate the Dhow CSD web portal here or download the mobile application on the Play or Apple store, register an account, and bid for T-bills.

How to Place Bids for T-bills via Dhow CSD

1.? Register for an account, if you do not have one by providing your personal information such as;

a) Active email address

b) KRA Pin

c) National Identity Card/Passport

d) Passport photos

2.?Login into your account and click on the Auctions menu to view the T-bills on offer

3.?After selecting your preferred bill, click the create bid tab

Types of Bids

·?Competitive Bids; You specify the exact discount rate you are willing to accept. Suitable for corporates or large investors investing huge sums of money.

· Non-competitive Bids; You agree to accept the weighted average rate of the accepted bids. This is suitable for smaller investors who are more flexible with the yield.

4. Fill in the details including the amount you are investing, yield (for competitive bids only), source of funds, and accept the terms

5.?Navigate to place bid tab and you will see a summary of your bid and confirm the details

6.?After confirmation, hooray! You will receive a notification that your bid has been submitted successfully.

The Dhow CSD platform also provides an option to cancel a bid before the auction’s deadline. You can navigate to the Bids menu, click the respective bid and click the cancel bid tab, confirm and the bid will be cancelled.

How do you know if your bid was successful?

The results of T-bills auctions are published on the CBK website and all its social media platforms.

Investors can as well access the T-bills auction results on Dhow CSD through the transactions tab which also indicates the amount you are required to pay.

Although the CBK can accept or reject your bid without an explanation, you have an opportunity to invest in T-bills every week.

How do you pay for successful Bids?

Payments for T-bills are typically made before 2pm after the auction date, usually on Monday, unless it’s a public holiday, then it will be the following day.

You are required to provide your CSD account number, the exact amount payable (do not round off the figure or provide less) and the payment key.

How to Determine the Return on Investment on T-Bills

The CBK provides a T-bills calculator that you can use to estimate the returns you will receive when you invest a certain amount at a specified interest rate.

Since T-bills are sold at a discount, the difference between the amount you invest and the price you pay to purchase the bill is the return you will earn.

On maturity of the bill, the CBK remits the face value of the bid to your commercial bank account. Investors also have an option to re-invest their maturing T-bills into an upcoming auction by submitting an application form to the CBK.

Can you Access your Funds Before the Maturity of the T-bill?

Investors can rediscount their bills before maturity by selling them back to the CBK. However, you are going to incur a loss because the CBK buys back at a lower rate. This limitation is due to the fact that T-bills are only traded at the primary market.

Nonetheless, T-bills can be transferred to holders of CSD accounts.

Key Features About T-bills

·?They are short-term, you can invest for three, six or twelve months

·?Higher interest rates offering competitive returns to investors

· T-bills are auctioned weekly, providing unlimited investment opportunity

·?Safer investment with minimum risk of losing your investment

·?The minimum investment is 100,000, and bills are sold at a discount

· Investors can conveniently invest in T-bills through the Dhow CSD platform

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