Target audience: Conservative investors, SMEs, diaspora Kenyans

Treasury Bills (T-Bills) and Treasury Bonds (T-Bonds) are government securities issued by the Central Bank of Kenya (CBK) on behalf of the National Treasury. They help the government raise funds for public expenditure and manage its borrowing needs.

Understanding the Core Difference

The main difference is the investment period and how returns are paid.

• Treasury Bills: Short-term government securities with maturities of less than one year. They are typically sold at a discount and do not pay periodic coupon interest. They are mainly used for short-term government cash-flow management.
• Treasury Bonds: Longer-term government securities with maturities of more than one year, extending to as long as 30 years. They generally pay periodic coupon interest and are used to finance longer-term government expenditure and capital projects.

How Kenyans Access Them

You do not need to be an institutional investor to invest in government securities. Through the Central Bank of Kenya (CBK) and authorized commercial banks, brokerages, and investment banks, retail investors can participate in government securities auctions.

Minimum investment requirements vary depending on the security and the applicable rules. Investors should verify the current threshold directly with CBK or their chosen authorized intermediary before investing.

The Risks No One Should Ignore

• Interest-Rate Risk: If you sell a bond before maturity in the secondary market, its market price may be lower than what you originally paid if interest rates have increased.
• Reinvestment Risk:
  When a T-Bill matures, the next available investment may offer a lower
  interest rate than the previous one.
• Liquidity Risk:
  Government securities are generally highly liquid, but selling a security
  through the secondary market may not be as straightforward or immediate
  for a retail investor as withdrawing money from an MMF.

The Diaspora Angle

Kenyans living abroad may use government securities to earn shilling-denominated returns while maintaining exposure to Kenyan investments.

The process is particularly important for diaspora investors because it may involve documentation, tax requirements, CDSC accounts, and the eventual repatriation of funds. Investors should work through a CBK-authorized channel that can support these requirements.

Elite Capitalist’s Role

Elite Capitalist does not auction securities on its own account. We educate clients on the government securities auction process, the yield curve, and the documentation required to participate.

Where we have referral arrangements with authorized intermediaries, we disclose those relationships clearly. We do not guarantee investment returns, and we do not hold client funds.