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Are you always wondering how you can invest in treasury Bills? Then you are in
the right place.
Investing in Kenya's Treasury Bills is a popular investment
option for both individual and institutional investors. Treasury Bills,
commonly known as T-bills, are short-term debt securities issued by the Kenyan
government to finance its budgetary needs. The Central Bank of Kenya (CBK)
issues these securities on behalf of the government, and they are sold through
auctions to investors.
Investing
in Kenya's Treasury Bills is a safe and secure investment option as it is
backed by the government, and the risk of default is very low. The investment
is also highly liquid, as T-bills can be easily bought and sold on the
secondary market. Moreover, the returns on T-bills are attractive and
competitive compared to other investment options, such as fixed deposits and
savings accounts.
Types
of Treasury Bills
In
Kenya, there are three types of Treasury Bills that are issued by the
government:
1.
91-Day T-bills: These are short-term
securities that mature in 91 days from the date of issue. They are usually
issued every two weeks, and their minimum investment amount is KES 100,000.
2.
182-Day T-bills: These are
medium-term securities that mature in 182 days from the date of issue. They are
usually issued every two weeks, and their minimum investment amount is KES
100,000.
3.
364-Day T-bills: These are long-term
securities that mature in 364 days from the date of issue. They are usually
issued every month, and their minimum investment amount is KES 100,000.
Investing
in Treasury Bills
To
invest in Kenya's Treasury Bills, an investor needs to follow the following
steps:
Step
1: Open a Central Depository and Settlement Corporation (CDSC) account. The
CDSC is a central depository for securities in Kenya, and all T-bill
transactions are conducted through this platform.
Step
2: Contact a licensed stockbroker. Investors cannot buy T-bills directly from
the Central Bank of Kenya but must go through a licensed stockbroker. The
stockbroker will guide the investor on the bidding process and place bids on
their behalf.
Step
3: Place a bid for the desired Treasury Bill. Bids can be made for any amount,
but the minimum amount for T-bills is KES 100,000. The bid should include the
desired amount, the type of T-bill, the bid price, and the maturity date.
Step
4: Wait for the auction results. The Central Bank of Kenya conducts T-bill
auctions every week, and the results are announced on the same day. If the
investor's bid is successful, they will receive an allotment of T-bills.
Step
5: Receive interest payments. Interest on T-bills is paid at maturity. The
investor will receive the principal plus the interest earned for the period
that the T-bill was held.
Benefits
of Investing in Treasury Bills
1.
Low-risk investment: Treasury Bills
are issued by the government, and they are considered low-risk investments. The
government has a high credit rating, and the risk of default is very low.
2.
Competitive returns: The returns on
T-bills are attractive and competitive compared to other investment options
such as fixed deposits and savings accounts.
3.
Highly liquid investment: T-bills
are highly liquid, and they can be easily bought and sold on the secondary
market. This makes them an ideal investment option for investors who require
quick access to their funds.
4.
Short-term investment: T-bills are
short-term investments, with maturities ranging from 91 days to 364 days. This
makes them an ideal investment option for investors who prefer short-term
investments.
5.
Diversification: Investing in
T-bills provides diversification in an investment portfolio. T-bills are
Disavantages of investing in kenyas treasury bills
There are several potential disadvantages of investing in
Kenya's treasury bills, including:
1.
Lower Returns: While treasury bills
are considered relatively safe investments, they typically offer lower returns
than riskier investments such as stocks or corporate bonds.
2.
Inflation Risk: There is a risk that
inflation may erode the value of your investment returns over time, especially
if the interest rate on the treasury bills is lower than the rate of inflation.
3.
Currency Fluctuations: If you are
investing in Kenya's treasury bills with a foreign currency, there is a risk
that currency fluctuations could negatively impact the value of your investment
returns.
4.
Limited Liquidity: Treasury bills are
typically short-term investments, which means they may not provide the same
level of liquidity as other types of investments such as stocks or mutual
funds.
5.
Political Risk: Investing in any
country carries a certain level of political risk, and Kenya is no exception.
There is a risk that political instability or changes in government policies
could negatively impact the value of your investment.
Overall,
investing in Kenya's treasury bills may be a suitable option for investors who
are looking for a relatively safe and short-term investment with moderate
returns. However, it's important to weigh the potential disadvantages against
the benefits and to consider your own investment goals and risk tolerance
before making any investment decisions.
a list of legalised stockbrokers in kenya
Here is a list of some of the licensed stockbrokers in
Kenya, as of my knowledge cutoff date of September 2021:
1.
African Alliance Kenya Securities
Limited
2.
AIB Capital Limited
3.
Apex Africa Capital Limited
4.
CBA Capital Limited
5.
Dyer & Blair Investment Bank
Limited
6.
Faida Investment Bank Limited
7.
Genghis Capital Limited
8.
KCB Capital Limited
9.
Kingdom Securities Limited
10.
NIC Securities Limited
11.
Renaissance Capital (Kenya) Limited
12.
SBG Securities Limited
13.
Standard Investment Bank Limited
14.
Sterling Capital Limited
15.
Suntra Investment Bank Limited
Please
note that this list is not exhaustive and there may be other licensed
stockbrokers in Kenya that are not included. Additionally, the licensing status
of these firms may have changed since my knowledge cutoff date.
