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Treasury Bonds

Treasury bonds are a secure, medium- to long-term investment that typically offer you interest payments every six months throughout the bond’s maturity. The Central Bank Auctions Treasury bonds on a monthly basis, but offers a variety of bonds throughout the year, so prospective investors should regularly check for upcoming auctions.

Most Treasury bonds in Kenya offer fixed rate, meaning that the interest rate determined at auction is locked in for the entire life of the bond. This makes Treasury bonds a predictable, long-term source of income. The National Treasury also occasionally issues tax-exempt infrastructure bonds, a very attractive investment.

Through the Dhow CSD portal and mobile application, Individuals and Corporate bodies can invest in Treasury bills without going through an intermediary by accessing https://dhowcsd.centralbank.go.ke/  and registering for CSD accounts. Investors inter alia individuals and corporates can equally invest via their respective Kenyan commercial banks and investment banks as custodials.

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Secure

Treasury bonds are units of government debt, meaning that you are investing in the Kenyan Government.
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Regular Returns

Most Treasury bonds carry semi-annual interest payments, allowing investors to receive returns every six months.
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Flexibility

The Central Bank auctions several different types of Treasury bonds, enabling investors to find bonds that fit their needs.
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Auctioned Monthly

Treasury bonds are auctioned every month, providing ample investment opportunities for diverse financial needs.
Follow this step-by-step guide to invest in Treasury bonds through the Central Bank:
1. Open a CDS Account

The first step to investing in Treasury bills is to open a CDS account with the Central Bank. It is free to open these accounts, which are how the Central Bank keeps track of who holds which government securities. Once you have your CDS account, which can be opened for an individual or a corporate body, you can invest in multiple Treasury bills and bonds, so you only need to complete this step the first time you’re investing.

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. 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.

You can find sample mandate cards HERE.

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.

Requirements for Individuals Opening CDS Accounts
•    Individuals may hold a single or joint CDS account but NO minor accounts.
•    Each individual CDS account holder/applicant MUST complete the CDS accounts specimen signature mandate card (the card) which can be collected from any of the Central Bank of Kenya Branches in Nairobi, Mombasa, Kisumu, Eldoret or the Currency Centres in Meru, Nakuru and Nyeri.
•    The card(s) should be completed in BLOCK LETTERS, neatly and clearly.
•    Names MUST be written in the order that they appear on the identification document.
•    NO alternations/errors.
•    The card MUST not be folded or disfigured in anyway.
•    Signatories to the CDS account will be required to sign the card in the presence of a designated CBK Officer or any Authorised Agent.
•    On completion applicants will personally submit the duly completed card(s) together with:
o    One recent coloured passport size photograph of the account holder.
o    The reverse side of the photograph MUST be certified by the applicants Bankers and stamped.
o    The photograph must NOT be stapled or glued to the card.
o    The original and clear copy of the National Identity Card/valid passport/alien certificate for verification. (Note that the copies will be retained by CBK.)
•    Two signatories of your Bankers, whether a commercial bank or financial institution must sign and stamp the card on the space provided, confirming the bank account details.

Kindly note:
•    The commercial bank/financial institution under Note 9 above must be licensed by the Central Bank of Kenya.
•    Payments will be made to the Bank account specified in the mandate card.
•    On receipt of all the requirements, CDS account application(s) will be processed within seven working days.
•    Change of address may be advised through a letter signed by signatories as per the mandate.
•    To change details of the CDS account one completes a CDS card and follows all the requirements mentioned from No. 1 to 9.
•    For any further clarifications kindly contact us by calling +254 20 2860000, by emailing ndo@centralbank.go.ke or applications@centralbank.go.ke, or by visiting our offices in Nairobi, Kisumu, Mombasa, Meru, Nakuru or Nyeri.

Requirements for Corporate Entities Opening CDS Accounts
•    All authorised signatories will be required to complete a mandate card, in this case is the specimen signature mandate card (the card), which can be collected from any of the Central Bank of Kenya Branches in Nairobi, Mombasa, Kisumu, Eldoret or the Currency Centres in Meru, Nakuru and Nyeri.
•    The card(s) should be completed in BLOCK LETTERS, neatly and clearly.
•    Names MUST be written in the order that they appear on the identification document.
•    NO alternations/errors.
•    The card MUST not be folded or disfigured in anyway.
•    Authorised signatories will be required to sign the card in the presence of a designated CBK Officer or any Authorised Agent.
•    On completion, applicants will personally submit the duly completed card(s) together with:
o    One recent coloured passport size photograph.
– The reverse side of the photograph MUST be certified by the applicants Bankers and stamped.
– The photograph must NOT be stapled or glued to the card.
o    Originals and copies of the following documents for certification (Note that the copies will be retained by CBK):
– Certificate of incorporation and/or valid licence and/or certification of registration.
– Minutes/extract of minutes of Board resolution authorising investment in Kenya Government Securities, stating the authorised signatories for the account, including their names and identification numbers.
– National Identity card, valid passport or alien certificate for the authorised signatories. For foreigners a valid work permit should be included.
– Audited report for the last financial year.
– Tax exemption certificate from Kenya Revenue Authority (if applicable).
•    Emboss corporate seal on all the CDS card(s).
•    Two signatories of your Bankers, whether a commercial bank or financial institution, must sign and stamp the card on the space provided, confirming the Bank account details.

Kindly note:
•    The commercial bank/financial institution under Note 9 above must be licensed by the Central Bank of Kenya.
•    Payments will be made to the bank account specified in the mandate card.
•    On receipt of all the requirements, CDS account application(s) will be processed within seven working days.
•    Change of address may be advised through a letter signed by signatories as per the mandate.
•    To change details of the CDS account one completes a CDS card and follows all the requirements mentioned from No. 1 to 10.
•    For any further clarifications kindly contact us by calling +254 20 2860000, by emailing ndo@centralbank.go.ke or applications@centralbank.go.ke, or by visiting our offices in Nairobi, Kisumu, Mombasa, Meru, Nakuru or Nyeri.

2. Decide How You Want to Invest

Treasury bonds are offered for a set amount of years, ranging, to date, from one to 30. When choosing a bond to invest in, you’ll need to consider what is available in the upcoming auction and how long of a commitment you want to make.

There are several types of bonds that are generally made available:

  • Most bonds auctioned by the Central Bank are fixed coupon Treasury bonds, which means that the interest rate associated with the bond will not change over the bond’s life, so semiannual interest payments from these bonds will stay the same.
  • Infrastructure bonds are used by the government for specified infrastructure projects. These bonds typically see a lot of market interest because returns from them are tax exempt.
  • Zero coupon bonds are similar to Treasury bills, in that they are sold at a discount and do not have interest payments. They are also typically issued for a short period of time.

When you are ready to invest, you should begin monitoring the upcoming bond prospectuses, found HERE, to find the right opportunity for you. In the prospectus, you will find information about the different bonds on offer, including the bonds’ durations until maturity, or tenor, and the coupon rates.

The coupon rate refers to the interest payments you will receive each six months. They can either be determined in the prospectus, which is typical for longer tenors, or be market determined. You will also find information in the prospectus about when investors will receive interest payments and the final redemption payment, as well as how much taxation the returns are subject to.

For more popular loans, you might also find information about amortization. When the government expects that a bond will result in significant investment, it will use amortization to reduce its burden when the bonds mature. Amortization means that instead of paying investors back in one lump sum at the end of the bond’s tenor, the Treasury pays portions of the bond back throughout its life. After these portions have been paid back to investors, they receive smaller interest payments as the amount of their money held with the Treasury has been reduced.

3. Complete and submit bids via the Dhow CSD Mobile app or portal

Creation of bids (Bills or Bonds)

  • After you log in to the Investor Portal, menu items are displayed on the left side of the screen.
  • Click on the Auctions menu item and a list of securities available for Auction are displayed.
  • Once you decide on preferred security, click on create bid tab against the selected security and a Place New Bid template will pop-up.
  • On the left top side of the bid form, you can opt to either place a Competitive or Non-Competitive Type of bid.
  • Fill in face value in “Amount” field.
  • Fill in desired rate in “Yield” field (applicable only to Competitive option)
  • The “Bid broker” field is defaulted to None (however, you may select a broker from options provided when submitting a bid for Bond securities only)
  • “Source of funds” field select either Local or Offshore
  • “Specific source of funds” field selects either Maturing T-Bill/T-Bond, Others or Salary. If you opt for “Others” you will be required to provide specific detail in “Additional information” field e.g., farming or Retail Business
  • Accept “Legal” and “Fund” terms by checking the boxes.
  • Click on Place Bid tab at the bottom right side and details of bid will be displayed for you to confirm before completing the process.
  • Once confirmed, place the bid and you will receive a pop-up message indicating that your bid has been submitted successfully. An investor will equally receive an email notification on his registered email address.

Approval of Placed Bids For Corporate and Joint Account Investors Only

  • For Corporate and Joint Account investors the initial process of placing a bid is as above, the status of bid will be displayed as “Pending Approval”.
  • One or two other persons as per the approval mandate set when opening the account will log into the IP and access Bids menu. Click on bid and details will be displayed including Approve and Reject tabs.
  • Click on Approve tab and details of bid will be displayed for you to confirm and an additional request for OTP number will be sent to either via your email or SMS as selected in notification menu
  • After input of received OTP number, system will process submission of bid.
  • Once the bid has been fully approved as per approval mandate status of bid is updated as submitted in Bids menu

Cancellation of Bids

  • To cancel a submitted bid before Auction cut-off time, click on the Bids menu item and list of submitted bids will be displayed.
  • Select the relevant bid and details will be displayed with a “Cancel bid” tab.
  • Click on Cancel bid tab on the top right side and details of bid will be displayed for you to confirm.
  • The Bids menu displays your bid with status as cancelled.

4. Getting the Auction Results

The Central Bank’s Auction Management Committee (AMC) meets at 4pm on auction days and, after considering all received bids, determines the cut-off rate and the weighted average of the accepted bids for market-determined coupon rate bonds. The results from the auction are published, through Twitter and in our statistics section https://www.centralbank.go.ke/bills-bonds/treasury-bonds/ in the CBK website. While investors will typically receive Treasury bonds in the amount they applied for, the Central Bank can issue bonds in a lower amount.

Following the auction closure, investors will need to access Dhow CSD via https://dhowcsd.centralbank.go.ke/ to determine if their bids were successful and to determine how much they would need to pay under the transactions tab. Payment for any ISIN should be done by 2pm on a settlement date or, if that settlement date a public holiday, the following business day.

5. Payment

Payment for any ISIN should be done by 2pm on a settlement date or, if that settlement date is a public holiday, the following business day will apply.

Successful bidders who fail to submit payments within the payment period for three consecutive times, will be automatically barred from future investment in government securities for a period of six months.

6. Maturity Proceeds

Investors who may have maturities on specific settlement dates, have the option of performing a netting action by activating the netting flag which can be found in the investor portal or mobile application under CSD accounts profile. By activating this flag, any corporate (coupon payment or redemption) that coincides with a given bid on a settlement date will be netted off and any refund or top up will be applied.