Thread🧵
Investing in Treasury Bonds.
The Treasury recently floated an 18 year Infrastructure bond.
Here's everything you need to know about Treasury Bonds,
And how you can invest in the Infrastructure Bond.
Investing in Treasury Bonds.
The Treasury recently floated an 18 year Infrastructure bond.
Here's everything you need to know about Treasury Bonds,
And how you can invest in the Infrastructure Bond.
Definitions:
Government securities are debt management obligations of the Kenyan gov't that individuals & organizations can invest in.
If you invest in government securities, you are lending the gov't money for a set period of time.
Government securities are debt management obligations of the Kenyan gov't that individuals & organizations can invest in.
If you invest in government securities, you are lending the gov't money for a set period of time.
There are two types of Government Securities.
1/ Treasury Bills(3-12 Months)
2/ Treasury Bonds(1-30 Years)
We'll focus on Treasury Bonds in this thread.
1/ Treasury Bills(3-12 Months)
2/ Treasury Bonds(1-30 Years)
We'll focus on Treasury Bonds in this thread.
What are T-Bonds?
Treasury Bonds are:
- a secure
- medium to long term investment
- that offers you interest payments every six months throughout the bond’s maturity.
Treasury Bonds are:
- a secure
- medium to long term investment
- that offers you interest payments every six months throughout the bond’s maturity.
Most T-Bonds in Kenya have a fixed rate. The interest rate determined at auction is locked in until maturity.
Investors purchase a certain amount, then receive a percentage of that amount every 6 months throughout the bonds maturity
Bonds require a MIN investment of ksh 100K
Investors purchase a certain amount, then receive a percentage of that amount every 6 months throughout the bonds maturity
Bonds require a MIN investment of ksh 100K
Once the bond matures, the investor receives a final interest payment and their initial investment.
Example:
Ksh 100K in a 10yr Bond with a coupon rate of 12% p.a.
Every 6 months, you will be receiving Ksh 6K
At the end of the 10 yrs, you get your initial investment back.
Example:
Ksh 100K in a 10yr Bond with a coupon rate of 12% p.a.
Every 6 months, you will be receiving Ksh 6K
At the end of the 10 yrs, you get your initial investment back.
Types of Bonds
1/ Infrastructure Bonds.
These are used by the government to finance Infrastructure projects.
They are tax exempt hence an investor's favorite bond.
2/ Fixed Coupon Bonds
The interest rate associated with the bond will not change over the bond's life.
1/ Infrastructure Bonds.
These are used by the government to finance Infrastructure projects.
They are tax exempt hence an investor's favorite bond.
2/ Fixed Coupon Bonds
The interest rate associated with the bond will not change over the bond's life.
Advantages of investing in T-Bonds
1/ Flexibility- The CBK auctions several different types of bonds on a monthly basis.
2/ Security- T-Bonds are considered risk-free investments.
The Kenyan government has no history of loan defaults.
1/ Flexibility- The CBK auctions several different types of bonds on a monthly basis.
2/ Security- T-Bonds are considered risk-free investments.
The Kenyan government has no history of loan defaults.
3/ Regular Returns- Bonds carry semi-annual interest payments, hence investors receive returns every six months.
4/ They offer better returns than what banks offer via fixed deposit and savings account.
Their average returns also beat the inflation rate.
4/ They offer better returns than what banks offer via fixed deposit and savings account.
Their average returns also beat the inflation rate.
5/ Diversity- Bonds have tended to zig when stocks have zagged, providing cushion for the crunching stock market.
Bonds will help you diversify your portfolio.
Bonds will help you diversify your portfolio.
How do you Invest in Treasury Bonds?
There are two ways:
1/ Directly through the Central Bank of Kenya(CBK)
2/ As a nominee of a commercial/investment bank or brokerage firm.
There are two ways:
1/ Directly through the Central Bank of Kenya(CBK)
2/ As a nominee of a commercial/investment bank or brokerage firm.
1/ Directly via CBK
This is the hard but best way.
You have to open a CDS account with the CBK.
To do this you have to collect the Mandate Card & other application forms from CBK head office in Nairobi,
Or any of it's other branches in Mombasa, Kisumu, Nyeri, Eldoret, Nakuru
This is the hard but best way.
You have to open a CDS account with the CBK.
To do this you have to collect the Mandate Card & other application forms from CBK head office in Nairobi,
Or any of it's other branches in Mombasa, Kisumu, Nyeri, Eldoret, Nakuru
You fill them & then submit them to your commercial bank to be signed & stamped.
After your CDS account is ready, and you're registered for the CBK TMD service,
You can apply & submit your bids via the *866# USSD as @mtucreativity had demonstrated here.
After your CDS account is ready, and you're registered for the CBK TMD service,
You can apply & submit your bids via the *866# USSD as @mtucreativity had demonstrated here.
2/ As a nominee of a commercial/investment bank or brokerage firm.
Third parties open CDS accounts on behalf of their clients and help them invest in Bonds.
They however charge some fees for this.
This is the easiest way you can buy bonds without the hassle of visiting CBK .
Third parties open CDS accounts on behalf of their clients and help them invest in Bonds.
They however charge some fees for this.
This is the easiest way you can buy bonds without the hassle of visiting CBK .
A notable advantage of investing in Bonds as a nominee is that it gives easy entry and exit into the bond market.
While it's hard to sell your bond before maturity with CBK, you can easily do so as a nominee.
While it's hard to sell your bond before maturity with CBK, you can easily do so as a nominee.
Here is an example of the application details via Faida Investment Bank.
They charge a one time fee of Ksh 2,000 and a 0.035% transaction fee.
They charge a one time fee of Ksh 2,000 and a 0.035% transaction fee.
Taxes
Interest and on T- Bonds with a tenor of below 10 yrs are charged a withholding tax of 15%.
For bonds with a tenor of more than 10 yrs, they are subject to 10% withholding tax.
Infrastructure Bonds are Tax Exempt.
Interest and on T- Bonds with a tenor of below 10 yrs are charged a withholding tax of 15%.
For bonds with a tenor of more than 10 yrs, they are subject to 10% withholding tax.
Infrastructure Bonds are Tax Exempt.
Here are the details of the recently floated 18 year Infrastructure bond as stipulated by CBK.
With the increased inflation, bonds are an ideal inflation hedge.
With the increased inflation, bonds are an ideal inflation hedge.
That's it for investing in bonds.
Hope you found it useful and you will apply for the Infrastructure bond.
If you found this thread useful:
1/ Follow me @kahome_steve for more amazing threads
2/ Retweet the first tweet in this thread so that other people may see it.
Hope you found it useful and you will apply for the Infrastructure bond.
If you found this thread useful:
1/ Follow me @kahome_steve for more amazing threads
2/ Retweet the first tweet in this thread so that other people may see it.
If you would love to learn more about investing in Bonds, join @Jayriq and I tonight as we discuss more on Bonds.
P.S
If you would like to learn more about getting started with investing and how to manage your finances,
My Masterclass will guide you on the best way to manage your money and get started with investing.
See details on how to register in the poster below.
If you would like to learn more about getting started with investing and how to manage your finances,
My Masterclass will guide you on the best way to manage your money and get started with investing.
See details on how to register in the poster below.
And if you are wondering what to expect from the masterclass,
Here's exactly what you will get.
Here's exactly what you will get.
P.S.
I published an e-book that will help you learn more about T-bonds, SACCOs, and Money Market Funds.
It has everything that you need to know about SACCOs, MMFs & T-Bonds.
Get it in the link below or DM for Mpesa details.
gichukikahome.gumroad.com
I published an e-book that will help you learn more about T-bonds, SACCOs, and Money Market Funds.
It has everything that you need to know about SACCOs, MMFs & T-Bonds.
Get it in the link below or DM for Mpesa details.
gichukikahome.gumroad.com
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