Treasury Bills & Bonds: What Are They and Their Vital Role in Financial Markets

A photo of the Central Bank of Kenya
A photo of the Central Bank of Kenya
KO Associates

Treasury Bonds and Bills are considered among the safest investments since they are backed by the full faith and credit of the government.  

In this regard, bonds and bills are not only an important form of investment for short and long tenors but are also used as a baseline for other investment returns.

When an investor buys Treasury Bills or Bonds, they are simply lending money to the government. Essentially, you're loaning money to the government by purchasing a bond at a predetermined interest rate. 

In turn, the government will pay you at a fixed interest rate for a set duration of time. Several people often confuse or fail to understand how the two instruments operate and their differences.

CBK Governor Kamau Thugge aggressing a Monetary Policy Committee (MPC) meeting on June 27, 2023.
CBK Governor Kamau Thugge addressing a Monetary Policy Committee (MPC) meeting on June 27, 2023.

The government uses the money to finance its operations and pay for ongoing expenses such as salaries for workers. 

Treasury Bonds

Treasury bonds are debt securities issued by the government and are traded on the secondary market, allowing bondholders to receive money for their security without re-discounting. 

There are many different term lengths and interest rates to choose from. Treasury bonds are long-term instruments with extended tenors.

CBK usually auctions Treasury Bonds every month, but offers a variety of bonds throughout the year, so prospective investors should regularly check for upcoming auctions.

Most Treasury Bonds in Kenya offer a 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. 

Treasury Bills

Meanwhile, Treasury Bills are short-term financial instruments issued by the Central Bank of Kenya with a maturity of up to one year.

If you invest money in a Treasury Bill, you will receive that money back within three months, six months or one year, depending on the bill you choose.

Treasury Bills are sold at a discount to the par value, which can be thought of as the maturity amount.

How to Invest in Treasury Bills

While commercial banks, corporate entities and pension schemes are some of the largest investors in government securities, individuals can invest directly through the Central Bank.

If you’re interested in investing in government securities you must have a bank account with a commercial bank in Kenya, and you must open a Central Depository Agent (CDS) account with CBK. 

A CDS account is an electronic account that holds shares only.

You will also need to submit a clear copy of your National Identity Card, passport or alien certificate.

Kenyans and foreign investors who meet these qualifications are free to invest in government securities directly with the Central Bank.

How to Invest in Treasury Bonds

Through the Dhow CSD portal and mobile application, individuals and corporations can invest in Treasury bills without going through an intermediary.

One can access the application platform through   and register for a CSD account.  

Investors can equally invest via their respective commercial banks.

A photo collage of President William Ruto and the Central Bank Headquarters Building in Nairobi, Kenya.
A photo collage of President William Ruto and the Central Bank Headquarters Building in Nairobi, Kenya.