What are Treasuries in the Kenyan context?

“Treasuries” are investments issued by the Government of Kenya to borrow money.

Instead of borrowing only from banks, the government borrows from:

• Individual Kenyans
• Companies
• Pension funds
• Insurance companies
• Banks
• Investment funds
• Foreign investors

When you buy Treasury security, you are lending money to the government. The government promises to pay you a return and repay the amount owed according to the security’s terms.

The Central Bank of Kenya acts as the government’s issuing, payment and registration agent. (Central Bank of Kenya)

The two main Treasury products

Treasury bills are offered regularly, normally weekly, while Treasury bonds are generally auctioned monthly.

Simple Treasury bill and bond examples

Simple Treasury bill example

You invest approximately KES 94,000 in a Treasury bill.

At maturity, the government pays you KES 100,000.

The difference is your gross return, before applicable tax.

Simple Treasury bond example

You buy a Treasury bond with:

• Face value: KES 1,000,000
• Coupon rate: 12% per year
• Interest paid: Every six months

Your gross interest would be:

• KES 120,000 per year
• KES 60,000 every six months

At maturity, the government returns the outstanding face value.

The language every bond investor must understand

Face value

This is the amount on which your coupon is calculated and the amount the government promises to redeem.

If you own KES 1 million face value, your coupons are calculated on KES 1 million—even if you paid more or less than KES 1 million to acquire it.

Coupon rate

The coupon is the interest rate written into the bond.

A 12% coupon on KES 1 million produces KES 120,000 gross interest annually.

Maturity date

This is the date on which the remaining principal is due for repayment.

Remaining maturity

This is more important than the bond’s original name.

A bond may be called a “20-year bond” because it was originally issued for 20 years. If 13 years have already passed, it only has seven years remaining.

Price

Bond prices are normally expressed per KES 100 of face value.

• Price of 100 means the bond is trading at par.
• Price of 95 means it trades below face value.
• Price of 105 means it trades above face value.

If you buy KES 1 million face value at a clean price of 95, the base purchase price is approximately KES 950,000 before accrued interest, taxes and transaction charges.

Yield to maturity

Yield to maturity, or YTM, considers:

• The coupon you will receive
• The price you pay
• The remaining time to maturity
• The amount repaid at maturity

The coupon tells you the bond’s cash interest rate. The yield tells you more about the return available at the current purchase price.

The fundamental bond rule

When market interest rates rise, existing bond prices normally fall. When market interest rates fall, existing bond prices normally rise.

This happens because investors compare an existing bond with newly available investments.

Clean price, accrued interest and dirty price

The clean price excludes interest that has accumulated since the previous coupon date.

The dirty price is the approximate amount actually paid:

Dirty price = Clean price + Accrued interest

For reopened and secondary-market bonds, the amount paid can therefore be higher than the quoted clean price.

A CBK prospectus, shows clean price, accrued interest and dirty price separately for the reopened bonds.

Deciding Whether Treasuries Suit You

• 1When should you favour Treasuries?

Treasuries are particularly useful when you want:

• Predictable income
• Lower investment risk than ordinary shares
• A place to preserve capital
• Income every six months (Treasury bonds)
• To match an investment to a future financial obligation
• To lock in a return for several years
• To diversify away from property, shares or business investments
• A security that may be pledged as collateral

Treasury bonds are government obligations and generally pay semi-annual interest. They can also be sold through the NSE before maturity, although the selling price is not guaranteed and fluctuates depending on market conditions.

When should you not put money into a long-term bond?

A long bond may not be suitable when:

• The money is your emergency fund.
• You may need the full amount soon.
• You have expensive debt that should be cleared first.
• You want high long-term capital growth rather than income.
• You cannot tolerate a temporary fall in market value.
• Your future expenses are mainly in dollars or another foreign currency.
• You do not understand the bond’s redemption or amortisation structure.

A bond can be safe from a credit perspective but still lose market value if you sell it before maturity.

Treasuries compared with other investments

A practical rule

• Money needed within one year: consider cash, a money market fund or Treasury bills.
• Money needed in two to five years: consider short- or medium-term bonds.
• Money intended to produce long-term income: consider a bond ladder or longer bonds.
• Money intended for aggressive long-term growth: bonds can be part of the portfolio, but equities and other growth assets may also be considered.

Buying Through the Primary Market

• 1What is the primary market?

The primary market is where you buy a Treasury security directly when the Central Bank offers it for auction.

You are buying from the government through CBK rather than buying an already existing bond from another investor.

The normal process is:

• 1Open a CBK DhowCSD account.
• 2Wait for an auction announcement.
• 3Read the prospectus.
• 4Select the bond.
• 5Submit a bid.
• 6Check whether the bid succeeded.
• 7Pay the amount due.
• 8Receive the bond in your CSD account.

Step 1: Open a DhowCSD account

For government securities, the important account is the CBK Central Securities Depository account, commonly called a CSD or CDS account.

You can register through:

Open the official CBK DhowCSD portal

The DhowCSD application is also available through the official Google Play and Apple App stores.

CBK currently lists the following requirements for an individual account:

• Valid email address
• Active phone number
• Passport-size photograph
• National ID, passport or alien card
• KRA PIN certificate or exemption certificate where applicable
• Active commercial-bank account held in Kenya

CBK says the settlement bank ordinarily approves the account within approximately 48 working hours.

Simplified registration process

• 1Visit DhowCSD.
• 2Select Create Account.
• 3Enter your email, username and password.
• 4Select Physical Person.
• 5Enter your personal and contact information.
• 6Add your Kenyan bank-account details.
• 7Upload your photograph, identification and KRA PIN.
• 8Enter the verification token sent to your email.
• 9Wait for approval from your settlement bank.
• 10Log in and confirm your CSD account number.

The current general minimum investment is KES 50,000, with additional amounts normally made in multiples of KES 50,000. The prospectus for each security must still be checked.

Step 2: Find the bonds currently on offer

Use the official CBK pages:

Check the CBK schedule at the link below - CBK Schedule

Review the Treasury bond prospectuses - CBK Prospectus,

Decide which auction to bid in

CBK publishes a prospectus showing:

• Issue number
• ISIN
• Original and remaining maturity
• Coupon rate
• Tax rate
• Amount being raised
• Period of sale
• Bid-closing time
• Auction date
• Settlement date
• Minimum and maximum bids
• Coupon-payment dates
• Redemption structure
• Pricing tables
• Whether the bond is new or reopened

Step 3: Read the prospectus before bidding

Do not select a bond using the coupon alone.

Check these items:

Step 4: Choose between non-competitive and competitive bidding

A. Non-competitive bid

With a non-competitive bid, you specify the face value you want, but you do not choose the yield.

You agree to accept the weighted-average yield determined by successful competitive bidders.

This is usually the most appropriate option for a beginner because you do not have to estimate the correct market yield. CBK’s auction rules define non-competitive bids as bids allotted at the auction’s weighted-average rate.

Example

You apply for KES 500,000 face value using a non-competitive bid.

After the auction:

• CBK determines the accepted average yield.
• That yield determines your purchase price.
• The amount you pay may be above or below KES 500,000.
• Accrued interest may also be added if the bond is reopened.

Current bidding limits

At the current state:

• Minimum non-competitive bid: KES 50,000
• Maximum non-competitive bid: KES 50 million
• Additional amounts: normally in KES 50,000 multiples

These limits can change, so always read the current prospectus.

B. Competitive bid

With a competitive bid, you specify:

• The face value you want
• The yield you require

The July 2026 prospectus placed the minimum competitive bid at KES 2 million per CSD account per tenor.

Competitive bids are considered from lower yields upward until CBK reaches its cut-off.

• A lower requested yield is more likely to be accepted, but it means paying a higher price.
• A higher requested yield gives you a better return if accepted, but increases the likelihood of rejection.
• At the cut-off, bids may be partially allocated.

CBK uses a multiple-price auction method in which successful competitive bidders are allocated according to their respective accepted bids.

Which should a beginner choose?

For most first-time retail investors, non-competitive bidding is the safer operational choice.

Step 5: Submit your primary-market bid

Within DhowCSD:

• 1Go to the bidding or auction section.
• 2Select the bond on offer.
• 3Select competitive or non-competitive bidding.
• 4Enter the face value.
• 5For a competitive bid, enter the required yield.
• 6Review the security, amount and account carefully.
• 7Submit before the stated deadline.
• 8Save the bid confirmation.

A bid is a commitment. Do not bid for an amount you will be unable to settle.

Step 6: Check your auction results

After the auction, check:

• The status of your bid
• The face value allocated
• The accepted yield
• The amount payable
• The payment key
• The payment deadline

Recent prospectuses direct successful investors to obtain the payment key and amount payable from the Transactions section of DhowCSD. CBK may accept a bid fully, accept it partially or reject it, and failure to pay a successful allocation may lead to suspension from future government-security investments.

Step 7: Pay for the bond

Use the payment instructions shown in DhowCSD and the prospectus.

Your payment details will ordinarily include:

• CSD account number
• Payment key
• Issue number
• Exact amount payable
• Settlement deadline

Do not simply transfer the face value. The amount payable may include:

• The clean price
• Accrued interest
• Applicable tax adjustments
• Any premium or discount

After successful settlement, the security should appear in your DhowCSD portfolio.

Method 1: Mobile Money (M-Pesa) — For amounts up to KSh 250,000

The Central Bank of Kenya (CBK) allows retail investors to settle smaller payments directly from their phones.

• 1Log into your account on the DhowCSD Web Portal or mobile app.
• 2Navigate to the Transactions tab.
• 3Locate your successful bid and select the option to Pay via M-Pesa.
• 4Enter your phone number to prompt a secure STK push notification directly on your mobile device.
• 5Enter your M-Pesa PIN to instantly clear the transaction.

Method 2: Bank Transfer (RTGS) — Required for amounts above KSh 250,000

For larger investments, you must authorize a Real-Time Gross Settlement (RTGS) transfer from your commercial bank.

• 1Log into your DhowCSD app or portal and visit the Transactions tab
• 2Click on the successful auction item to retrieve your unique Payment Key (Reference Number) and exact Amount Payable.
• 3Log into your commercial banking app (or visit a physical branch) and initiate an RTGS transfer to the Central Bank of Kenya.
• 4Provide the exact transfer details required by the bank:

Beneficiary Name: Your full name matching your DhowCSD profile.

Beneficiary Bank: Central Bank of Kenya.

CSD Account Number: Your unique CSD portfolio number (found under Settings > Profile Info > Accounts in DhowCSD).

Payment Reference: Input the exact Payment Key retrieved from DhowCSD.

Amount: The exact discounted amount due.

Note: If you won multiple bids in the same auction week, you must process an entirely separate RTGS transaction for each bid using its respective Payment Key.

What happens after purchase?

Once the bond is in your CSD account:

• Coupons are paid to your registered bank account.
• You can view your holdings through DhowCSD.
• You can hold the bond until maturity.
• You can sell it through the secondary market.
• You may be able to pledge it as collateral.
• The outstanding principal is repaid according to the redemption schedule.

Most conventional bonds pay coupons every six months. CBK also allows government securities to be pledged to regulated financial institutions, subject to the applicable process.

Buying Through the Secondary Market

• 1What is the secondary market?

The secondary market is where investors buy and sell Treasury bonds that have already been issued.

You are generally buying from another investor rather than directly from the government.

Kenyan Treasury bonds are listed for secondary trading through the Nairobi Securities Exchange.

Important account clarification

For Treasury bonds, your main holding account is the CBK DhowCSD account.

This is not exactly the same as the ordinary CDSC account commonly used for shares.

For a Treasury-bond trade:

• The bond is registered in the CBK government-securities depository.
• A licensed broker places your order through the NSE.
• Your CBK CSD account is used in the trade and settlement process.

The NSE’s fixed-income rules recognise CDS accounts established either by a central depository or by the Central Bank of Kenya.

Step 1: Choose a licensed broker or investment bank

Use an NSE trading participant or another properly authorised intermediary.

Official NSE list of trading participants

Confirm the institution’s current licence before sending money. (Capital Markets Authority)

Ask the broker:

• Do you trade government bonds for retail investors?
• What is your minimum order?
• What commission and other charges apply?
• How do I link my CBK CSD account?
• Where do I send settlement funds?
• Will you provide clean price, dirty price and yield before execution?
• Can I place a limit order?

Step 2: Complete broker onboarding and linkage

The broker may request:

• National ID or passport
• KRA PIN
• Photograph
• Proof of bank account
• Address and contact details
• Source-of-funds information
• Your CBK CSD account number
• Signed trading agreement
• Broker-linkage or authorisation instructions

DhowCSD’s investor guide provides for preferred brokers, broker linkage and “earmarking,” which designates Treasury bonds for NSE trading. (Central Bank of Kenya)

For a purchase, make sure the broker knows the correct CSD account into which the bond should settle.

For a sale, you may need to earmark the security or give instructions allowing the broker to place it in the trading book.

Earmarking a security means setting aside a specific bond in your CSD account for a particular transaction—usually for sale through the secondary market.

Step 3: Identify the bond you want

Do not tell the broker only that you want “a 15-year bond.”

Specify the exact:

• Issue number
• ISIN
• Face value
• Remaining maturity
• Target yield or maximum price

Use:

Click here to see the full list of NSE bonds currently trading on the secondary market.

On the same page click on the Download Daily Bond Price List link to view the daily statistics.

You may also request a list of live bids and offers from your broker.

What to compare

After reviewing all the above make the final decision of the bond you want to purchase.

Step 4: Ask for a live quotation

A broker’s quotation should ideally show:

• Issue number and ISIN
• Face value available
• Coupon rate
• Remaining maturity
• Offered yield
• Clean price
• Accrued interest
• Dirty price
• Estimated fees
• Total amount required

A previous day’s market price is a reference, not a guaranteed purchase price.

Step 5: Place a clear written order

A useful instruction could read:

Buy KES 1,000,000 face value of FXD1/2022/010 for my CBK CSD account, at a yield of not less than X% /or a dirty price not exceeding KES Y, valid until [date].

The order should be clear about whether your limit is based on:

• Yield
• Clean price
• Dirty price

NSE fixed-income order instructions include the security code, CSD account, buy or sell direction, quantity, price or yield, and the order’s validity period.

Step 6: Fund the transaction

Follow the broker’s official settlement instructions.

Before sending money:

• Confirm that the bank account belongs to the licensed institution.
• Confirm the amount in writing.
• Ask whether the quotation includes all fees.
• Do not send investment money to an employee’s personal account or mobile number.

Step 7: Execution and settlement

The broker places the order through the NSE’s fixed-income trading system.

When the order matches:

• Money is paid by the buyer.
• The bond is transferred to the buyer’s CSD account.
• Settlement occurs on a delivery-versus-payment basis.
• The current NSE fixed-income rules provide for T+3 settlement, meaning settlement should occur within three business days after the trade.

After settlement:

• 1Check your DhowCSD portfolio.
• 2Confirm the correct issue and face value.
• 3Keep the contract note.
• 4Confirm the next coupon date.
• 5Confirm the total amount paid, including fees and accrued interest.

Primary Market Versus Secondary Market

• 1When should you favour the primary market?

The primary market may be better when:

• You are comfortable with the bonds currently being offered.
• You do not need a specific maturity that is absent from the auction.
• You want to invest directly through CBK.
• You prefer a non-competitive bid.
• You want to avoid brokerage commissions.
• You are willing to wait for the auction and settlement dates.

Primary-market advantages

• Direct access through DhowCSD
• No need to find an existing seller
• Non-competitive bidding is beginner-friendly
• No normal stockbroker commission when investing directly
• Official prospectus provides the terms

Primary-market disadvantages

• Limited to the bonds currently on offer
• You do not know the final non-competitive yield beforehand
• Allocation can be affected by the auction outcome
• Payment deadlines are strict
• Reopened issues may include substantial accrued interest
• You may have to wait for the next auction

When should you favour the secondary market?

The secondary market may be better when:

• There is no suitable bond in the current auction.
• You want a particular maturity date.
• You want an existing tax-free infrastructure bond.
• You want to know the price and yield before committing.
• You want to invest without waiting for the next auction.
• You want to compare several bonds across the yield curve.

Secondary-market advantages

• Wider choice of bonds
• Ability to target a specific maturity
• Ability to negotiate or limit the purchase price
• Opportunity to buy between auctions
• Access to existing infrastructure bonds
• More control over the yield being accepted

Secondary-market disadvantages

• Broker and transaction charges
• Some bonds may have limited sellers
• Bid-offer spreads can reduce your return
• The quoted clean price is not the full amount paid
• Greater need to understand yields and pricing
• A trade may not execute immediately

Infrastructure bonds and reopened bonds

Infrastructure bonds

Labelled IFB

Infrastructure bonds finance specified infrastructure expenditure.

Their main attraction is that their interest is commonly tax-exempt, where this is expressly provided in the prospectus.

Reopened bonds

A reopened bond is an existing bond offered again.

It retains its existing:

• Issue number
• Coupon rate
• Maturity date
• Coupon dates
• Tax treatment

Because it is partway through a coupon period, the buyer may have to pay accrued interest.

Taxation

Withholding tax on ordinary Treasury bonds

As a general framework:

• General interest commonly attracts 15% withholding tax.
• Interest from qualifying long-term bearer bonds of ten years and above commonly attracts 10%.
• Qualifying infrastructure-bond interest is generally tax-exempt.

KRA’s published withholding-tax guidance shows 15% for general interest and 10% for interest from long-term bearer bonds of ten years and above. (Kenya Revenue Authority)

Do not calculate the tax rate from remaining maturity

A bond originally issued for ten years may now have only five years remaining but still carry the tax treatment stated in its prospectus.

For example, CBK’s July 2026 offer included a ten-year bond with only 5.8 years remaining, but the prospectus still stated 10% withholding tax.

Always use the tax rate shown in the bond’s prospectus.

Tax example

Suppose you hold KES 1 million face value with a 12% coupon.

Gross annual interest:

KES 1,000,000 × 12% = KES 120,000

What Every Retail Investor Should Know

• 1A high coupon does not automatically mean a better bond

Consider:

• Bond A: 14% coupon, price 110
• Bond B: 12% coupon, price 92

Bond A pays more coupon income, but you are paying a substantial premium.

Bond B pays a lower coupon, but you are buying below face value.

The better comparison is after-tax yield to maturity, not coupon alone.

Face value is not the same as purchase cost

You may apply for KES 1 million face value but pay:

• KES 950,000 if the bond is at a discount
• KES 1 million if it is at par
• KES 1.1 million if it is at a premium
• Plus accrued interest in a reopening or secondary trade

Budget using the dirty price, not just the face value.

Holding to maturity is different from selling early

If you hold a conventional bond to maturity:

• You continue receiving coupons.
• Temporary market-price changes may not affect your contractual cash flows.
• The government repays the outstanding face value according to the prospectus.

If you sell early:

• You receive the prevailing market price.
• You may make a gain.
• You may suffer a loss.
• You may have to wait for a buyer.
• Fees and the bid-offer spread reduce your proceeds.

The major risks

Interest-rate risk

If market yields rise, your bond’s price normally falls.

Inflation risk

A 12% return is less valuable if the cost of living is rising rapidly.

Liquidity risk

You may not find a buyer immediately at the price you want.

Reinvestment risk

Coupons and amortised principal may have to be reinvested at lower future rates.

Sovereign risk

The bond is an obligation of the Government of Kenya. It is generally regarded as lower credit risk than private-sector debt, but sovereign risk is not literally zero.

Currency risk

A positive return in Kenyan shillings may still be negative in dollar terms if the shilling weakens significantly.

Duration risk

Long bonds are generally more sensitive to changes in interest rates than short bonds.

Operational risk

Entering the wrong CSD account, issue number, yield or payment reference can delay or invalidate a transaction.

Consider building a bond ladder

Instead of investing all your money in one 20-year bond, you could spread it across different maturities.

For example:

• 20% in Treasury bills
• 25% in a three- to five-year bond
• 25% in a medium-term bond
• 30% in a longer infrastructure or conventional bond

This provides:

• Different maturity dates
• More frequent access to principal
• Reduced dependence on one interest-rate level
• Opportunities to reinvest as market conditions change

The beginner’s final checklist

Before buying, confirm:

• I have an emergency fund outside the bond.
• I know when I may need the money.
• I have read the official prospectus.
• I know the exact issue number and ISIN.
• I know the remaining maturity.
• I understand the coupon and yield.
• I have checked the clean and dirty price.
• I know the applicable tax rate.
• I have checked whether the bond amortises.
• I know the coupon-payment dates.
• I understand what happens if I sell early.
• My bank and CSD information is correct.
• My broker is licensed by the CMA.
• I have received written payment instructions.
• I am not sending money to a personal account.

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