Treasury Bonds vs. Treasury Bills in Kenya: The Ultimate Comparison

If you are an individual or a corporate body looking to invest in the government, you must have heard about treasury bonds and treasury bills in Kenya. These two are ways that the Kenyan government seeks funds from the public to conduct different projects in the country. In return, the investors gain an interest from what they’ve invested. So, how do treasury bills vs. treasury bonds in Kenya compare?

Their maturity is what will tell you whether it’s a bond or a bill. 

Treasury bills are secure short-term investments, which means they will mature in a year or less. Also, the minimum amount to invest in a T. bill is KES. 100,000. On the other hand, a treasury bond is a medium to long-term investment that takes over a year to mature. The minimum amount you need to invest is KES. 50,000.

Why should you invest in any of these? Are there any more differences between the two?

In this post, we delve deeply into the differences between treasury bills and bonds in Kenya. After you know the difference between the two, you will be in a better position to choose which serves you best.

Which is Better: Treasury Bills or Bonds? 

Choosing between the two and deciding which one is better boils down to what your preferences and expectations are. 

For instance, if you are looking to invest in KES. 50,000, then you might have to choose bonds. 

However, if you aim to invest more than a hundred thousand, then bills are what you need to invest in.

For a better decision, let’s break down what treasury bills and treasury bonds really are.

Also Read: Treasury Bonds In Kenya: The Ultimate Guide

Treasury Bills

The Central Bank of Kenya defines treasury bill as a safe yet short-term investment. The bill offers the investor returns, which are auctioned every week.

Treasury bills are sold at a discount, which means you get to choose the amount to receive when it matures. 

This is also referred to as the face value of the bill. You also get to buy the bill at a lesser amount.

Any individual or corporate body can also take part as a commercial bank nominee. However, if they have another account with any local bank, they can invest directly using the Central Bank of Kenya to get away from extra fees.

The government of Kenya, through the Central Bank of Kenya, sells bills in 91 days,182 days, and 364 days.

Treasury Bonds

Bonds are medium to short-term investments. It offers investor interest payments every six months. However you should note that bonds’ maturity may be over a year.

The CBK auctions treasury bills every month. Most of these bonds have a fixed interest rate. This means that you can always predict the interest amount you will receive in the life of the bond.

One of the most attractive investments is the tax-free infrastructure bonds. 

Comparison Table

ComparisonTreasury Bills Treasury Bonds
Maturity91 days, 182 days and 364 days1 to 30 years
Interest ratesDiscountedFixed
Minimum amount to investKes. 100,000KES. 50,000
Treasury bonds vs. Treasury bills in Kenya

4 Factors That Make Treasury Bonds a Good Investment in Kenya

Treasury bonds are a good investment to consider. There are a few factors that contribute to this fact. Here are some of these factors:

1. Different Bonds to Choose From

If you decide to invest in bonds, you will be faced with a few options to choose from. For instance, the CBK has a fixed coupon treasury bond that has a fixed interest rate.

This means that you will be getting a consistent amount of interest from your investment. This makes it a predictable way of earning income from investing. 

The government also issues infrastructure bonds through the CBK, and the interests are tax-free.

Also Read: Youth Funds Mobile Loans In Kenya

2. Affordability

Compared to bills, treasury bonds only require you to have a minimum of KES. Fifty thousand to start investing. This makes it very affordable for most people and corporations. 

This makes it more accessible to many investors.

3. Tax-Free Benefits

Also, if you choose to go with the infrastructure bond, it means that you will be exempted from tax. This allows you to receive your interest without the worry of possible government taxes.

Zero coupon bonds are also another good option that is similar to bills in terms of affordability. With this type of bond, you get to buy at a discounted amount, further making it more affordable.

4. Reliability

Both bonds and bills are some of the most secure investments because the government offers them. This fact reduces the defaulting risks that many investors worry about.

What Is the Interest Rate on Kenya Treasury Bonds?

As we mentioned earlier, treasury bonds have a fixed interest rate. This means regular and consistent returns every six months.

This means that you will get a specific amount of income in terms of the interest earned.

Frequently Asked Questions

What is the difference between Treasury bills and Treasury bonds in Kenya?

The main difference between these treasury bills and treasury bonds is in their maturity. While treasury bills are short-term and can mature in one year or less, bonds may take one year or more to mature. 

Treasury bonds takes up to 30 years to mature, depending on the investor’s choice. Treasury bills also require a minimum of KES. 100,000 to invest. 

Treasury bonds, on the other hand, require a minimum of KES. 50,000 to invest. Bills may also have some discounts when buying.

Bonds, on the other hand, you have to go with the zero coupon code bonds to receive the discount.

Are Treasury bonds a good investment in Kenya?

Treasury bonds are a good investment in Kenya, especially if you’re looking for an affordable way to invest. Treasury bonds are also a safe and reliable investment because the government issues them.

Many investors who dread defaulting can depend on government treasury bonds because they are reliable. With bonds, you also have a variety to choose from. 

There are tax-free bonds that you can choose from and ones with discounts, such as the infrastructure government bonds and the zero coupon bonds, respectively.

This variety allows you, as an investor, to choose from a good number of options. 

What is the key difference between marketable government bonds and Treasury bills?

Apart from the maturity date difference, the other difference is in their minimum investment amounts. While bills will require you to have about KES. 100,00 bonds require you to invest with a minimum of KES. 50,000. 

This difference makes it affordable for many investors to take part in treasury bonds more than in treasury bills. 

The minimum amount on bonds might also be reduced if the investor chooses the no-coupon treasury bond that comes with a discount.

The treasury bill is also an investment that takes a shorter time to mature than the treasury bond. For bills, you might wait for a year or less, but with bonds, you can even wait for up to 30 years for them to mature.