Kenya Treasury bonds (often called T-bonds) are one of the most widely used fixed-income investments in the country. When you buy a Treasury bond, you’re lending money to the Government of Kenya for a set number of years. In return, you typically receive:

  • Interest payments every six months (semi-annual coupons), and
  • Your principal back at maturity, unless the bond is structured to repay principal gradually through amortization.

Treasury bonds are auctioned by the Central Bank of Kenya (CBK), and investors can participate either: 1) Directly (via the DhowCSD portal/app), or
2) Indirectly (through Kenyan commercial banks or investment banks acting as custodians/brokers).

This guide is designed to be practical: once you understand the concepts, you can apply them to any new bond auction or prospectus.

Table of contents

Treasury bonds vs Treasury bills: what’s the difference?

People often mention “bills and bonds” together, but they serve different goals.

Treasury bills (T-bills)

  • Short-term (typically under 1 year)
  • Often sold at a discount (you pay less than face value, receive face value at maturity)
  • Common tenors include 91, 182, and 364 days

Treasury bonds (T-bonds)

  • Medium- to long-term (often 1–30 years, depending on what’s offered)
  • Usually pay semi-annual coupon interest
  • Can be held to maturity for predictable income, or sold earlier in the secondary market

If you want to park money short-term, bills can work. If you want multi-year income and longer-term planning, bonds are usually the better fit.

Why investors like Treasury bonds

1) Government-backed credit profile

Treasury bonds are government debt securities. Many investors treat them as among the more secure KES-denominated options compared to private issuers.

2) Regular income (semi-annual coupons)

Most Treasury bonds pay interest every six months. If you want predictable cashflow (school fees planning, business cycles, portfolio income), this payment structure is very useful.

3) Flexibility across different needs

CBK auctions different bond tenors over the year. That means you can match your bond term to your goal:

  • medium-term needs (a few years),
  • long-term wealth building (10–30 years),
  • or a mix (laddering).

4) Accessible investing routes

You can invest directly via DhowCSD without needing an intermediary, or choose the convenience route through banks/brokers.

How Treasury bond returns work

To invest well in bonds, you must understand three ideas: coupon, yield, and price.

Coupon rate (the bond’s stated interest)

The coupon rate is the annual interest rate applied to the bond’s face value (also called par value).
If a bond has a 12% coupon and you invest KES 100,000 face value:

  • annual coupon interest = KES 12,000
  • paid semi-annually → KES 6,000 every 6 months (before tax, if taxable)

In Kenya, many bonds are fixed coupon: once set, the coupon doesn’t change.

Yield (your actual return)

Yield reflects your return based on the price you pay for the bond.

  • If you buy at par (price ~ 100), yield is close to coupon.
  • If you buy at a premium (price above 100), your yield can be lower than coupon.
  • If you buy at a discount (price below 100), your yield can be higher than coupon.

In auctions, competitive bidders submit a yield they want. In the secondary market, yield moves as prices move.

Price per 100 (how bonds are quoted)

Bonds are often quoted as a price per KES 100 of face value.
A price of 102 means you pay KES 102 for every KES 100 face value (premium).
A price of 98 means you pay KES 98 for every KES 100 face value (discount).

Accrued interest (clean price vs dirty price)

Between coupon payment dates, the bond “earns” interest daily. If you buy mid-cycle, you may pay:

  • Clean price (quoted price), plus
  • Accrued interest (interest earned since last coupon date)

That’s normal in bond markets and matters for cash planning.

Key bond terms you must understand

When you read a CBK prospectus, these are the terms that matter most:

  • Tenor / years to maturity: how long until redemption
  • Issue / series: identifies the bond
  • Coupon rate: fixed interest paid on face value
  • Auction date: date bids are evaluated
  • Settlement date: date you pay and receive the bond
  • Bid cut-off time: deadline for bids
  • Non-competitive and competitive thresholds: who can bid what
  • Coupon payment dates: when interest gets paid
  • Redemption date: when principal is repaid
  • Amortization (if applicable): principal repaid in portions instead of a lump sum

Once you understand these, prospectuses stop looking “technical” and start looking like a checklist.

Types of Treasury bonds in Kenya

Kenya bonds are offered in different formats. The ones you’ll commonly encounter:

1) Fixed coupon Treasury bonds (standard)

This is the most common type. The coupon is fixed for the bond’s life. You get predictable semi-annual coupons.

2) Infrastructure bonds (IFBs)

Infrastructure bonds are issued to fund specific infrastructure projects. They are often popular because some IFBs can be tax-exempt on coupon interest (where stated in the prospectus).

3) Zero coupon bonds

These resemble bills in the sense that they may not pay coupons and may be issued at a discount. Availability varies.

4) Re-openings and switch auctions

Kenya frequently does re-openings, where an existing bond is re-issued to raise additional funds. Sometimes there are switch auctions, where an investor can exchange one bond for another under announced terms.

Taxes: what you keep vs what is withheld

In Kenya, interest income on many government securities is subject to withholding tax, applied to the interest, not the principal.

Typical approach

  • Taxable bonds: withholding tax is deducted from coupon payments.
  • Tax-exempt bonds (some infrastructure bonds): coupon interest may not be taxed.

Important: do not assume “infrastructure bond = tax-free” automatically. Always confirm the tax treatment in the prospectus for that issue.

Why after-tax yield matters

Two bonds can look similar on the surface, but deliver different net returns after tax.
If you compare bonds, compare on:

  • expected coupon income after tax, and
  • yield after tax (especially if you’re buying at premium/discount).

How CBK Treasury bond auctions work

Treasury bonds are offered through CBK auctions. The broad flow:

1) CBK publishes a prospectus for an upcoming bond auction
2) Investors place bids before the cut-off
3) CBK accepts bids (fully or partially) based on auction rules and demand
4) CBK publishes auction results
5) Successful bidders pay by the settlement deadline
6) Bonds are credited to the investor’s CSD account

CBK also reserves the right to accept or reject bids in full or partially.

Step-by-step: how to buy Treasury bonds via DhowCSD

DhowCSD allows individuals and corporates to invest without going through an intermediary.

Step 1: Open your DhowCSD account

You can access DhowCSD via:

  • Web portal: DhowCSD
  • Mobile app (Google Play / Apple App Store)

Follow CBK’s official account-opening steps and complete KYC. Once activated, you can participate in primary auctions.

Step 2: Decide how you want to invest

Before bidding, decide:

  • how long you want to lock your money (bond tenor),
  • whether you want predictable coupons (fixed coupon) or special tax status (where available),
  • whether you want to bid competitively (choose yield) or non-competitively (accept auction outcome).

Step 3: Monitor upcoming auctions and prospectuses

Prospectuses tell you:

  • what bonds are on offer,
  • their coupon rates or pricing structure,
  • payment schedule,
  • tax treatment,
  • whether the bond is amortized,
  • minimum bid requirements,
  • the auction and settlement dates.

Step 4: Create and submit bids in DhowCSD (Bonds)

Creation of bids (Bonds):

  1. Log into the Investor Portal (web/app).
  2. Click Auctions to view available securities.
  3. Choose the bond you want and click Create bid.
  4. Choose Competitive or Non-Competitive at the top of the form.
  5. Enter the face value in the Amount field.
  6. If competitive: enter your desired Yield.
  7. Optionally choose a Bid broker (for bond securities).
  8. Select Source of funds (Local or Offshore).
  9. Select Specific source of funds (e.g., Maturing T-Bill/T-Bond, Salary, Others).
    • If “Others,” include details in “Additional information.”
  10. Accept the Legal and Fund terms (checkboxes).
  11. Click Place Bid, confirm the bid details, then submit.
  12. You should receive a success pop-up and an email notification.

Corporate and joint accounts: approval flow

If your account has an approval mandate:

  • the bid initially shows as Pending Approval,
  • other mandate holders log in, view the bid, and Approve/Reject,
  • OTP may be required to finalize submission,
  • once fully approved, the bid status updates to submitted.

Cancelling a bid (before cut-off time)

  1. Open Bids menu.
  2. Select the relevant bid.
  3. Click Cancel bid, confirm cancellation.
  4. The bid status changes to cancelled.

Optional: placing bids via Treasury Mobile Direct (USSD)

CBK also provides a USSD option (Treasury Mobile Direct). Use it if you prefer phone-based bidding or need a fallback when web/app access is difficult.

Competitive vs non-competitive bids (simple explanation)

Non-competitive bids

  • You specify the amount you want to invest.
  • You accept the auction’s final pricing/yield outcomes.
  • Often preferred by beginners because it’s simpler.

Competitive bids

  • You specify the amount and the yield you want.
  • You may get accepted, partially accepted, or rejected depending on your yield vs market clearing level.
  • Better for advanced investors who understand yield dynamics.

If you’re new, start non-competitive, learn how auction results behave, then decide whether competitive bidding adds value for you.

After the auction: results, payment, settlement

1) Getting auction results

After the auction:

  • CBK publishes results on its website and channels.
  • You can also check your individual outcome inside DhowCSD.

2) If your bid is successful: how payment works

Successful bidders must pay by the settlement deadline.

A practical checklist:

  • Check DhowCSD Transactions tab for:
    • amount payable,
    • payment key,
    • settlement date.
  • Make payment using:
    • your CSD account number,
    • amount payable,
    • payment key.

Missing the deadline can cause penalties or restrictions. Treat settlement like a hard deadline.

Using maturities to pay for new bids (netting)

If you have maturities (coupon or redemption payments) on the same settlement date as a successful bid, you can activate netting so the maturity offsets what you owe.

How to enable netting

  • On web portal: My account information → CSD linking → activate netting flag
  • On mobile app: Settings → Account → activate netting

Once enabled, any corporate action (coupon/redemption) coinciding with settlement can be netted off:

  • If maturity > amount payable → you may receive a refund difference
  • If maturity < amount payable → you top up the difference

This is one of the most practical “workflow” tools for investors who roll maturities into new bonds.

Selling before maturity: the secondary market

You’re not forced to hold a bond to maturity.

How secondary-market selling works

  • You sell the bond through a broker (often a bank or investment firm).
  • The bond price depends on prevailing market yields.
    • If yields have fallen since you bought → bond price may rise → possible capital gain.
    • If yields have risen since you bought → bond price may fall → possible capital loss.

This is why long-tenor bonds can be powerful (bigger price moves), but also riskier if you need to exit early.

When selling early can make sense

  • You need liquidity and prefer selling over rediscounting.
  • You want to rebalance your portfolio (duration, cashflow, risk).
  • You want to lock in a profit after yield movements.

Bond strategies: laddering for cashflow and flexibility

Treasury bonds become much more useful when you think in systems.

1) Maturity ladder (liquidity planning)

A ladder means buying bonds with staggered maturities (e.g., some maturing in 2, 5, 10 years). Benefits:

  • reduces reinvestment timing risk,
  • improves flexibility,
  • prevents “all your money” being locked until one distant maturity.

2) Coupon calendar planning (income planning)

Because coupons are semi-annual, you can select bonds whose coupon months align with your needs:

  • school fees months,
  • annual insurance renewals,
  • business inventory cycles,
  • rent buffer planning.

3) Reinvestment discipline

Instead of spending coupons randomly:

  • reinvest coupons into your next bond bid,
  • park coupons in an MMF while accumulating toward the next minimum bid,
  • or direct coupons toward specific goals (a planned expense category).

4) “Beginner progression” approach

A simple path many investors use:

  1. Start with a smaller non-competitive bond allocation
  2. Learn settlement, coupon schedules, and how results behave
  3. Add laddering and intentional coupon reinvestment
  4. Consider competitive bidding when you can interpret yield outcomes confidently

Risks and common mistakes to avoid

Treasury bonds are widely viewed as relatively safe, but they still have risks—especially for investors who may need cash before maturity.

1) Interest rate risk

Bond prices move opposite yields. If you may sell early, this matters.

2) Liquidity risk

Some issues trade more actively than others. In a rush, you may accept a worse price.

3) Cashflow mismatch

Don’t invest money you need next month into a bond you plan to hold for years unless you’re sure you can exit sensibly.

4) Confusing coupon rate with yield

Coupon is not your full story. Yield + price + tax determine your real return.

5) Missing settlement deadlines

Treat auction + settlement dates as fixed operational deadlines.

6) Over-concentration

Avoid putting all your funds in one bond, one maturity date, or one strategy. Diversify by:

  • maturity (ladder),
  • product mix (bonds + bills + MMF where appropriate),
  • and timing (multiple auctions over time).

FAQ

What is a Treasury bond in Kenya?

A Kenya Treasury bond is a government debt security where you lend money to the Government of Kenya through a CBK auction and receive interest payments (usually every six months) plus principal repayment at maturity (or through amortization for some bonds).

How often are Kenya Treasury bonds auctioned?

Treasury bonds are offered through scheduled CBK auctions (often monthly for bonds). The exact dates vary, so you should check the current CBK auction calendar and the latest bond prospectus.

What is the minimum amount to invest in a Treasury bond?

Minimum investment depends on the specific issue and bid type. Some bonds allow non-competitive bids from around KES 50,000, while competitive bids may have higher minimums (often in the millions). Always confirm in the current prospectus.

What is the difference between coupon rate and yield?

Coupon rate is the fixed interest rate paid on the bond’s face value, while yield reflects your actual return based on the price you pay (which can be above or below face value) and the time to maturity.

Are infrastructure bonds tax-free in Kenya?

Some infrastructure bonds may be issued as tax-exempt, which means coupon interest is not subject to withholding tax. This is not automatic for every bond, so confirm the tax treatment in the bond’s prospectus.

How do I buy Treasury bonds using DhowCSD?

Open a DhowCSD account, monitor upcoming bond auctions, create a bid (competitive or non-competitive), submit before the cut-off time, then pay for successful bids by the settlement deadline using your CSD account details and payment key.

Can I sell a Treasury bond before it matures?

Yes. You can sell Treasury bonds in the secondary market (typically through a broker/bank) before maturity. The sale price depends on market yields at the time, so you may sell at a profit or loss.

What is netting on DhowCSD?

Netting allows maturities (coupon or redemption payments that fall on the same settlement date) to offset what you owe for a successful bid, reducing the amount you need to top up or increasing any refund due.