Treasury bonds are medium- to long-term investments, and their maturity can range from one year to 30 years. There are many different types of Treasury bonds, but their basic operations are similar.
How To Buy Kenya Government Bonds
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.
To buy Treasury bonds, you need a Central Depository for Securities (CDS) account maintained at the Central Bank of Kenya.
This is different from the CDSC (Central Depository Securities Corporation) account that you need to buy equities/shares.
How many Treasury bonds can you buy?
You need a minimum of KES 50K to start investing in bonds.
Understandably, this is a large amount of money, especially for a beginning investor which poses a barrier to entry unlike investing in Money Market Funds where you can begin investing with as little as KES 2,500.
If you cannot raise KES 50,000 or 100,000 for infrastructure bonds, don’t despair. Start with a money Market Fund then onboard Treasury bills & bonds in your investment portfolio later.
Note: Aside from Money Market Funds, you can invest in Bond Funds or Balanced Funds as these give you more exposure to treasury and corporate bond instruments.
How do Treasury bonds work in Kenya?
The government through the National Treasury comes up with the budget estimates for the fiscal year showing projected revenue and expenditure. Almost always, the planned expenditure exceeds the projected revenue mainly from taxes. The deficit is usually plugged through domestic and international borrowing.
Treasury bonds are a way of raising the domestic share of funds to support the budget.
Both institutions and individual investors can subscribe to bond issues by lending the government money with a promise to get a return every 6 months and the principal at the end of the bond term.