For Kenyans abroad looking for a straightforward, regulated way to put capital to work at home, government securities are often the first instrument worth understanding. Treasury Bills and Treasury Bonds, issued by the Central Bank of Kenya on behalf of the National Treasury, have historically offered some of the highest real yields available in the region, and they come with the full backing of the Government of Kenya.
What are Treasury Bills and Bonds?
A Treasury Bill is a short term instrument, issued for 91, 182, or 364 days, sold at a discount and redeemed at face value, with the difference representing your return. A Treasury Bond is longer dated, typically two to thirty years, and pays a fixed coupon at regular intervals until maturity. Both are auctioned regularly and both are considered the lowest risk instruments available in the Kenyan market, since they are backed by the state rather than a single corporate issuer.
- Treasury Bills. Shorter term, useful for investors who want liquidity within a year and a predictable, discounted return.
- Treasury Bonds. Longer term, useful for investors building a core income generating position over several years.
- Infrastructure Bonds. A category of Treasury Bond that funds specific infrastructure projects, often carrying additional tax advantages.
Why yields have been attractive
Kenyan government paper has, over recent cycles, offered yields well above those available on comparable instruments in many developed markets. This reflects the country’s own interest rate environment and inflation dynamics, and is one reason these instruments draw sustained interest from both local and diaspora investors seeking income. Yields move with market conditions and are never guaranteed, but the transparency of the auction process means investors can see exactly what is on offer before committing capital.
How diaspora investors participate
Non-resident Kenyans can invest in Treasury Bills and Bonds, though the practical route matters. Direct participation requires a CDS (Central Depository System) account and satisfying standard KYC and source of funds requirements, all of which can be completed remotely with the right guidance. Alternatively, a portfolio management mandate with a licensed institution allows government paper to be held as part of a professionally managed, diversified portfolio, with reporting sent directly to you wherever you are based.
Government securities are rarely a whole strategy on their own, but they are frequently the anchor around which a diaspora portfolio is built.
What to weigh before investing
Government paper is low risk relative to other instruments in the market, but it is not risk free. Inflation can erode real returns over the life of a bond, and currency movements affect what a return is worth once converted back to the currency you actually spend day to day. Longer dated bonds also carry interest rate risk: if rates rise after you have locked in a fixed coupon, the market price of your existing bond can fall, which matters if you need to sell before maturity rather than hold to term.
SIBK’s Contractual Portfolio Management Services include government securities among the fixed income instruments available to clients, structured either as a standalone allocation or as one part of a diversified mandate. If you are exploring how Treasury Bills or Bonds might fit into a portfolio managed from abroad, our advisers are glad to walk through the options with you.