A Guide to Investing In Treasury Bills in Kenya

Introduction

In Kenya’s financial landscape, Treasury Bills (T-Bills) stand out as a cornerstone investment, particularly for those seeking safety and short-term returns. T-Bills are short-term government securities issued by the Central Bank of Kenya (CBK) on behalf of the National Treasury. They serve as a crucial mechanism for the government to raise money for its short-term financial needs.

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Understanding T-Bills is essential for a wide range of individuals and entities, including first-time investors looking for a secure entry point, students aiming to grow small savings, professionals diversifying their portfolios, and institutions seeking to park idle cash. This guide will walk you through everything you need to know about investing in T-Bills in Kenya.

How Treasury Bills Work

Treasury Bills operate on a simple yet effective principle: they are issued at a discount and redeemed at their full face value upon maturity. Unlike traditional bonds that pay periodic interest (coupons), investors in T-Bills earn their return from the difference between the discounted purchase price and the higher maturity value.

The CBK offers T-Bills with various maturity periods, known as tenors:

• 91-day T-Bills
• 182-day T-Bills
• 364-day T-Bills

Because T-Bills are direct obligations of the Government of Kenya, they are widely considered to be risk-free investments, making them a popular choice for conservative investors.

Key Features of Treasury Bills in Kenya

• Issuer: The Government of Kenya, through the Central Bank of Kenya (CBK).
• Tenors: Available in 91-day, 182-day, and 364-day maturities.
• Minimum Investment: The minimum investment amount is KES 100,000, with additional amounts in multiples of KES 50,000.
• Auction Frequency: T-Bills are typically auctioned weekly, usually on Thursdays. The 364-day paper is often offered once a month.
• Types of Bids:
  • Competitive Bid: Investors specify the yield (interest rate) they are willing to accept. This is common for institutional investors or those with large sums.
  • Non-competitive Bid: Investors agree to accept the average yield determined at the auction. This option guarantees allocation and is simpler for retail investors.
• Tax Treatment: The discount earned from T-Bills is subject to a 15% withholding tax in Kenya. This tax is deducted at source, meaning you receive your return after the tax has been applied.

Why Invest in Treasury Bills?

Investing in T-Bills offers several compelling advantages:

• Safety: As they are backed by the full faith and credit of the Government of Kenya, T-Bills carry near-zero default risk, making them one of the safest investment options available.
• Liquidity: While not traded on the Nairobi Securities Exchange, T-Bills can be sold in the secondary market (though this might involve a discount) or rediscounted with the CBK as a last resort, offering a degree of liquidity.
• Short-term Maturity: Their short tenors make them ideal for preserving capital over a brief period or for parking idle cash that you anticipate needing in the near future.
• Predictable Returns: Once your bid is accepted, your return is fixed, providing certainty and protecting you from market volatility.
• Diversification: T-Bills can serve as an excellent diversifier in an investment portfolio, complementing more volatile assets like stocks or real estate.
• Broad Appeal: They are suitable for both large institutions and individual retail investors.

The Auction Process Explained

The process of investing in Treasury Bills primarily occurs through a weekly auction managed by the CBK:

• Step 1: Announcement: Every Friday, the CBK issues an auction notice, detailing the amount of T-Bills to be offered, the bidding deadline, and the auction date. You can typically find these announcements on the CBK website.
• Step 2: Bidding: Investors submit their bids through their commercial banks or directly via the CBK’s Treasury Mobile Direct (TMD) platform. Bids must typically be submitted before 2:00 PM on Thursday for the 91-day paper, and sometimes on Wednesday for 182-day and 364-day papers.
• Step 3: Auction & Allocation: The CBK reviews all competitive and non-competitive bids. A cut-off yield is determined, and T-Bills are allocated to successful bidders. Non-competitive bids are guaranteed allocation at the average accepted rate.
• Step 4: Payment: Successful bidders are required to pay the discounted amount for their allocated T-Bills, usually by electronic transfer (RTGS), by 2:00 PM on the following Monday (the value date).
• Step 5: Maturity: Upon the maturity date of the T-Bill, the investor automatically receives the full face value of their investment directly into their designated commercial bank account.

How to Invest in Treasury Bills in Kenya

There are two primary ways to invest in T-Bills:

Option 1: Through a Commercial Bank

This is a common method for many investors:

• Open a Central Depository System (CDS) account: This account is essential for holding government securities. Most commercial banks can help you open a CDS account linked to the CBK.
• Fill out a T-Bill application form: Obtain this from your bank or the CBK website.
• Submit bids weekly: Ensure your bids are submitted to your bank before the Thursday 2:00 PM deadline (or Wednesday for longer tenors).
• Pay upon success: If your bid is successful, ensure you have sufficient funds in your linked bank account for the discounted purchase price.

Option 2: Treasury Mobile Direct (TMD)

The CBK’s Treasury Mobile Direct (TMD) platform simplifies investing in T-Bills for retail investors, allowing direct participation via mobile phone.

• Requirements:
  • Must be a Kenyan citizen.
  • Have a registered mobile number (Safaricom, Airtel).
  • Possess a valid Kenyan ID or passport.
  • Have an active CDS account at the Central Bank of Kenya.
• How to Use: Dial *889# to register and follow the prompts to submit bids, make payments, and track your investments directly from your mobile phone.
• Learn More: You can find the CBK Treasury Mobile Direct (TMD) registration form and requirements on the CBK website.

Example of Treasury Bill Return Calculation

Let’s illustrate how the return on a T-Bill is calculated:

Suppose you invest KES 500,000 (face value) in a 364-day T-Bill with an accepted average yield of 13.5%:

• Discount amount: KES 500,000 (13.5 ÷ 100) = KES 67,500
• Purchase price (what you pay): KES 500,000 – KES 67,500 = KES 432,500
• Return before tax: KES 67,500
• Withholding tax (15%): KES 67,500 × 0.15 = KES 10,125
• Net return (what you receive after tax): KES 67,500 – KES 10,125 = KES 57,375

Comparing Treasury Bills to Other Investments

Here’s a quick comparison of T-Bills with other common investment options in Kenya:

Feature	T-Bills	Fixed Deposits	SACCOs	Money Market Funds
Risk	Very Low	Low	Medium	Low–Medium
Return	8-14% p.a.	6–10% p.a.	8–12% p.a.	9–14% p.a.
Liquidity	Medium	Low	Low	High
Tenure	Short (up to 1 yr)	3–12 months	Long term	Flexible
Tax Treatment	15% withholding	15% withholding	Taxed at source	15% withholding

Note: Returns are subject to market conditions.

Pros and Cons of Treasury Bills

Pros:

• Government-backed: Near-zero risk of default.
• Higher Yield: Generally offer better returns than traditional bank savings accounts.
• No Upfront Fees: You typically don’t pay direct fees to invest in T-Bills (though banks might have charges for managing your CDS account).
• Accessible: The TMD platform makes it easy for individual retail investors to participate directly.

Cons:

• Not Inflation-Protected: While offering good returns, T-Bills might not always outpace high inflation, leading to a negative real return.
• Minimum Investment: The KES 100,000 minimum might be a barrier for some small savers.
• Fixed Returns: The return is determined at auction and does not offer upside potential from market movements.
• Early Exit: Exiting before maturity requires selling in the secondary market, which might involve a price risk (selling at a lower price than anticipated).

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Who Should Consider T-Bills?

Treasury Bills are an excellent fit for:

• Conservative Investors: Those prioritizing capital safety over aggressive growth.
• Savers Looking to Beat Inflation: A good option for preserving purchasing power for short-to-medium-term goals.
• Short-term Planners: Individuals or businesses with capital they anticipate needing within a year.
• Institutions, NGOs, and Businesses: Ideal for parking large cash reserves securely.
• Beginner Investors: The simplicity and low risk make them a good starting point, especially when using the TMD platform.

Risks and Considerations

Beyond the general pros and cons, keep these in mind:

• Inflation Risk: As mentioned, if inflation rises significantly above the T-Bill yield, your real return could be negative.
• Reinvestment Risk: When your T-Bill matures, the prevailing interest rates might be lower, meaning you’ll have to reinvest at a reduced yield.
• Liquidity Risk: While a secondary market exists, there’s no guarantee you can sell your T-Bill quickly at your desired price if you need to exit before maturity.
• Taxation: The 15% withholding tax reduces your effective return, a factor to always consider in your calculations.

Current T-Bill Rates in Kenya (Example – August 2025)

As of early August 2025, recent CBK auction results indicate approximate average yields for T-Bills as follows:

• 91-day: ~8.11%
• 182-day: ~8.41%
• 364-day: ~9.72%

Note: These are based on recent auction results from the CBK as of August 4, 2025. Actual rates vary weekly based on market demand and government borrowing needs. Always refer to the latest CBK auction results for the most accurate figures.

How to Track and Stay Updated

To make informed investment decisions, it’s crucial to stay updated on T-Bill rates and auction announcements:

• Central Bank of Kenya Website: The official source for weekly auction results.
• Treasury Mobile Direct (TMD) Platform: Use the *889# (or *866#) platform for direct SMS alerts and information.
• Financial Newsletters & Apps: Subscribe to reputable financial news outlets or use investment tracking apps that provide updates on government securities.

Conclusion

Treasury Bills in Kenya offer a secure, predictable, and accessible investment avenue for individuals and institutions alike. Their government backing makes them a low-risk option, ideal for capital preservation and achieving short-to-medium-term financial goals. While they may not offer the highest returns compared to riskier assets, their stability and liquidity make them a valuable component of a diversified portfolio.

By understanding how T-Bills work, the auction process, and how to invest through commercial banks or the convenient Treasury Mobile Direct platform, you can confidently start making your money work for you. Remember to always evaluate your options based on your personal financial goals and keep an eye on the latest CBK auction results to make the most informed decisions.

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