How to Invest  in Treasury Bills in Kenya: A Simplified Step-by-Step Guide

Investing wisely is the cornerstone of financial security and growth. One avenue that offers a secure and potentially rewarding investment opportunity in Kenya is Treasury bills. These government-backed securities are popular with both individual and corporate investors for their reliability and attractive returns. 

However, learning how to invest in treasury bills in Kenya can be complex for new investors. That’s why this guide is here to simplify the process for you.

In the following sections, we’ll break down the steps to investing in Treasury bills in Kenya, from opening your CDS account to reaping the rewards at maturity. Whether you’re a seasoned investor or new to government securities, this guide will provide you with a clear and accessible roadmap to get started. 

Let’s dive right into the steps. 

Steps to Start Investing in Treasury Bills in Kenya

• Step 1: Open a CDS Account
• Step 2: Choose Your Investment Option
• Step 3: Fill Out and Submit Your Application Form
• Step 4: Check the Auction Results
• Step 5: Make Your Payment
• Step 6: Reap the Rewards at Maturity

Step 1: Open a CDS Account

Before you can start investing in Treasury bills in Kenya, you need to open a Central Depository System (CDS) account with the Central Bank. This account is like your gateway to government securities, and the good news is, it’s completely free to open. You only need to do this once, even if you plan to invest in multiple Treasury bills and bonds.

Here’s how to open a CDS account:

For Individuals:

1. Make sure you have a bank account with a Kenyan commercial bank.
2. Visit the Central Bank or one of its branches to collect a mandate card. This card is your key to the CDS account.
3. Fill out the mandate card clearly in BLOCK LETTERS. Write your names exactly as they appear on your identification document.
4. Avoid any alterations or errors on the card. Keep it clean and unfolded.
5. Two signatories from your commercial bank must sign and stamp the card to confirm your bank account details.
6. Attach a recent passport-sized photograph of yourself. Make sure the back of the photo is certified and stamped by your bank representative.
7. Include a clear copy of your National Identity Card, passport, or alien certificate for verification. The Central Bank will retain these copies.

For Corporate Entities:

1. All authorized signatories need to complete a mandate card, known as the specimen signature mandate card.
2. Visit the Central Bank or one of its branches to get the mandate card.
3. Fill out the mandate card neatly in BLOCK LETTERS. Ensure names match your identification documents.
4. Don’t make any alterations on the card, and keep it in good condition.
5. Authorized signatories must sign the card in front of a designated CBK Officer or any Authorized Agent.
6. Attach a recent colored passport-sized photograph for each authorized signatory. The back of these photos should be certified and stamped by your bank.
7. Provide originals and copies of the following documents for certification (copies will be retained by CBK):
   • Certificate of incorporation and/or valid license and/or certification of registration.
   • Minutes or extracts of minutes of the Board resolution authorizing investment in Kenyan government securities. 
   • Include the names and identification numbers of authorized signatories. 
   • National Identity card, valid passport, or alien certificate for authorized signatories. For foreigners, include a valid work permit.
   • Audited report for the last financial year.
   • Tax exemption certificate from the Kenya Revenue Authority (if applicable).
8. Emboss your corporate seal on all the CDS cards.
9. Two signatories from your bank must sign and stamp the card to confirm your bank account details.

Remember:

• The commercial bank/financial institution must be licensed by the Central Bank of Kenya.
• Payments will be made to the bank account specified in the mandate card.
• Your CDS account application(s) will be processed within seven working days once all requirements are met.
• If you change your address, notify the Central Bank through a letter signed by your authorized signatories.
• To update CDS account details, complete a CDS card and follow the requirements from steps 1 to 10.

For further assistance, you can contact the Central Bank by phone, email, or by visiting their offices in Nairobi, Kisumu, Mombasa, Meru, Nakuru, or Nyeri.

Step 2: Choose Your Investment Option

When it comes to investing in Treasury bills, you’ve got some choices to make. Treasury bills are available every week, and they come with different maturity periods: 91 days, 182 days, or 364 days. So, before you dive in, here’s what you need to do:

1. Check the Available Treasury Bills: Start by checking out the Treasury bills that are up for grabs this week. You can find this information [here](link). 
2. Decide on the Maturity Period: Now, you need to pick how long you want to invest your money. You can choose from the 91-day, 182-day, or 364-day options. Your decision should be based on two things:
   • Recent Interest Rates: Look at the current interest rates. They can give you an idea of what you might earn in upcoming auctions.
   • Your Investment Horizon: Consider how long you’re willing to lock up your funds.

3. Minimum Investment Amount: Keep in mind that the minimum amount you can invest in Treasury bills is Kshs. 100,000, and you must invest in multiples of Kshs. 50,000. Here’s the deal: Treasury bills are sold at a discount, which means your initial investment will be less than the face value. However, when the 91, 182, or 364-day period ends, you’ll get the full face value back.

So, take your time to review the available options, consider your financial goals and how long you can commit your funds, and then make your choice. It’s all about finding the Treasury bill that suits you best.

Step 3: Fill Out and Submit Your Application Form

Now that you’ve decided which Treasury bill suits your needs, it’s time to take the next step and complete a Treasury bill application form. Here’s what you need to know:

What the Application Form Requires:

The application form is like the blueprint for your Treasury bill investment. It’s where you specify the details of your investment:

• Treasury Bill Details: Provide information about the Treasury bill you want to buy, including its issue number, the maturity period (91 days, 182 days, or 364 days), and the face value amount you expect to receive when the bill matures.
• Personal Information: Include your personal details like your full name, telephone number, CDS account number, and indicate whether the funds you’re investing are coming from a local or offshore source.

Choose Your Rate Option:

When it comes to selecting a rate, you’ve got two options:

1. Interest/Competitive Rate: If you go with this option, you’ll submit an interest rate that you’re willing to pay for the Treasury bill. The Central Bank then reviews all the bids and sets a cutoff rate. If your rate is higher than the cutoff, you won’t get the Treasury bill.
2. Non-Competitive/Average Rate: With this choice, you’re guaranteed to get a Treasury bill from the auction. However, your interest rate will be a weighted average of the accepted bids from investors who chose the Interest/Competitive Rate. Keep in mind that the maximum face value for Non-Competitive/Average Rate applications is Kshs. 20 million.

Rollover Instructions:

There’s also a section on the application form for Rollover Instructions. This is for investors who want to reinvest their returns from maturing bills and bonds into more government securities.

Submission Deadline:

Don’t forget the timing! You need to submit your completed application form to the Central Bank’s head office or one of its branches by 2 p.m. on Thursday if you’re investing in 364, 182, or 91-day bills.

So, make sure you have all your information handy, fill out the form accurately, and meet the submission deadline to kickstart your Treasury bill investment journey.

Step 4: Check the Auction Results

After you’ve submitted your application, the Central Bank’s Auction Management Committee (AMC) gets to work. They convene at 4pm on auction days to review all the bids they’ve received.

Here’s what happens next:

• Cut-off Rate and Successful Bids: The AMC determines the cut-off rate and the weighted average of the accepted bids. These results are crucial because they determine the interest rate you’ll pay and whether your bid was successful.
• Result Publication: The results from the auction are made public through multiple channels, including Treasury Mobile Direct (TMD), Twitter, and the statistics section on the CBK website. Keep an eye out for these announcements.
• Payment Amount: While you’ll usually receive Treasury bills in the amount you applied for, please note that the Central Bank might issue bills for a lower amount.

Step 5: Make Your Payment

Once you know the results of the auction and how much you owe for your Treasury bills, it’s time to make your payment. Here’s what you need to know:

The payment period typically closes on the following Monday at 2pm. If that Monday happens to be a public holiday, you have until the following Tuesday.

Payment Methods:

• For amounts under Kshs. 1 million, you can make payments in cash or through banker’s cheques.
• For larger amounts, use a KEPSS (Kenya Electronic Payment and Settlement System) transfer.

It’s crucial to meet this payment deadline. Failing to do so can result in being barred from future investments in government securities.

So, stay on top of the auction results, make your payment promptly, and you’ll be well on your way to building your Treasury bill portfolio.

Step 6: Reap the Rewards at Maturity

Once your Treasury bill matures, you’re in for a payday.

Here’s how it works:

• Maturity Date: At the end of your chosen 91, 182, or 364-day period, the face value of your Treasury bill will be transferred into the commercial bank account linked to your CDS account. This is where you’ll receive the full amount you initially invested.
• Rollover Option: Alternatively, you can opt to roll over your securities into a new Treasury bill issue. To do this, complete an application form with your rollover instructions and submit it to the Central Bank before the sale period for the new bill closes. It’s important to note that for a rollover to be successful, the maturity date of your current investment and the value date of the new Treasury bill must match.
• Refund Amounts: When you choose to roll over, the Central Bank won’t transfer the maturing proceeds into your bank account. Instead, they will only send the refund amounts generated from your new investment.

So, at the end of your Treasury bill’s term, you’ll have the option to either cash out and receive your full investment or reinvest by rolling over into a new Treasury bill. It’s all about maximizing your returns based on your financial goals.

Steps Summary: 

Investing in Treasury bills in Kenya can be a smart financial move to grow your wealth. By following the steps I have outlined, you can navigate the process with confidence. 

Here is a recap of the steps: 

1. Open a CDS Account: Start by setting up your Central Depository System (CDS) account, which is your ticket to government securities. Ensure you meet all the requirements and provide the necessary documentation.
2. Choose Your Investment: Decide on the Treasury bill that suits your financial goals and investment horizon. Consider the maturity period and recent interest rates to make an informed choice.
3. Complete and Submit Your Application Form: Fill out your Treasury bill application form accurately. Select your preferred rate option and consider whether you want to set up rollover instructions.
4. Check the Auction Results: Keep an eye out for the auction results, which will determine the success of your bid and the interest rate you’ll pay.
5. Make Your Payment: Ensure you make your payment on time according to the specified deadline. Use the appropriate payment method based on the amount you owe.
6. Reap the Rewards at Maturity: When your Treasury bill matures, you’ll receive the face value amount in your linked commercial bank account. Alternatively, you can choose to roll over your investment into a new Treasury bill issue.

By following these steps, you can actively participate in Kenya’s Treasury bill market, potentially earn returns on your investments, and work toward your financial objectives. It’s a straightforward process that empowers you to make your money work for you.

Investing in Treasury Bills in Kenya: FAQs