How to invest in Treasury Bills in Kenya

Treasury bills are a secure, short-term investment, offering you returns after a relatively short commitment of funds. Treasury bills are issued by the Government to support its budget. 

Treasury bill rates in Kenya are attractive, providing an excellent investment opportunity that is readily available, as they are auctioned each week.

Treasury bills are sold at a discount. This means that investors choose the amount that they will receive when the bill matures, or the face value of the bill, and pay less than that amount when purchasing it.

Individuals and corporate bodies can invest in Treasury bills as a nominee of a commercial bank or investment bank in Kenya, but if you hold a bank account with a local commercial bank you can also invest directly through the Central Bank and avoid additional fees.

Follow this step-by-step guide to invest in Treasury bills through the Central Bank:

1. Open a CDS Account

First you need to open a CDS account with the Central Bank. A CDS account can be opened for an individual or a corporate body. It is free to open these accounts.

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. The Central Bank Branches are located in Nairobi, Kisumu, Mombasa, Meru, Nakuru or Nyeri.

You’ll need to provide contact information and information about your commercial bank account. You’ll also need to have to have two signatories from your commercial bank sign the card to verify the information you’ve provided.

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. Decide How You Want to Invest

Treasury bills are offered every week, with maturities of 91 days, 182 days and 364 days. This means that when you are ready to invest, you will be able to choose from one of those options.

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 for.

The minimum face value purchase for Treasury bills is Kshs. 100,000, and you must invest in denominations of Kshs. 50,000. Because Treasury bills are sold at a discount, this face value amount is what you will receive at the end of the 91, 182 or 364 day maturity.

Your initial investment will be less than the face value.

3. Complete and Submit an Application Form

When you are ready to invest, you need to complete a Treasury bill application form. This includes information about the Treasury bill you want to purchase, like the issue number, the maturity period you want, and the face value amount you want to receive upon maturity. It also includes information about yourself, including your names, telephone number; CDS 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 determines how much you will pay for the bill and, therefore, what your return will be when the bill matures.

Recently CBK has introduced Treasury Mobile Direct (TMD) where you can place your orders through your mobile phone.

There are 2 ways to invest; competitive and non-competitive bids.

· In the competitive bidding you indicate the rate you expect CBK to pay you for the money you are lending. The Central Bank then decides what bids it will accept and determines a cutoff.

· In the non-competitive bidding you accept the average rate of the accepted bids. The maximum face value for Non-Competitive/Average Rate applications is Kshs. 20 million.

4. Get 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 successful weighted average of the accepted bids. The results from the auction are published, through Treasury Mobile Direct (TMD), Twitter, and on the CBK website. 

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 2pm on the following Monday or, if the Monday is a public holiday, the following Tuesday. Those that apply through Treasury Mobile Direct (TMD) get a SMS whether their bid was accepted and the amount of money they need to pay.

5. Payment

The payment period for an auction typically closes on the following Monday at 2pm. Investors can submit their payments, in the amounts specified when they contact the Central Bank, through banker’s cheques for amounts under Kshs. 1 million and through a KEPSS transfer for larger amounts. Nowadays thanks to online banking you can now do online transfer to CBK using RTGS transfer. 

Successful applicants who fail to submit payments within the payment period can be barred from future investment in government securities.

6. Maturity Proceeds:

At the end of the 91-, 182- or 364-day period, the face value amount of the bill will be remitted into the commercial bank account indicated on the CDS account. Alternatively, An Investor may choose to rollover their securities into a new forthcoming issue and in this case, they have to complete application form giving rollover instructions and submit to Central Bank before closure of the period of sale for that bill.