Gen-Z Guide to Financial Freedom

Why Invest in Treasury Bills?

T- bills are a great option for those who want a safe investment with a guaranteed rate of Return-Suze Orman.

What is Treasury Bill (T-bill)?

This is a short-term debt instrument issued by the Central Bank of Kenya that is used to help the government finance its budget. It is usually issued in three maturities: 91 days, 182 days, and 364 days.

Treasury bill is zero-coupon security, meaning that it does not pay interest during its term. Instead, it is issued at a discount to its face value, and the investor receives the full face value at maturity.

How T-bills in Kenya are issued.

T-bills in Kenya are issued through an auction process. The Central Bank of Kenya will announce the amount of T-bills to be auctioned and the maturity dates. Then, interested investors can submit bids to buy T-bills at a specific interest rate. The interest rate is determined by supply and demand, with the highest bid being the winning bid. The T-bills are then issued to the successful bidders and are held in a Central Depository System (CDS) account until maturity.

Key Words.

Auction Process-This is essentially a way for the government to borrow money from investors. By auctioning T-bills, the government is essentially offering investors the opportunity to lend money to the government in exchange for a fixed interest rate. The interest rate is determined by supply and demand, with the highest bid being the winning bid.

FAQs about Kenyan T-bills.

1.Minimum amount you can invest in Kenyan T-bills.

The minimum amount is KSh 50,000. This means that anyone can invest in T-bills, regardless of their income level or financial situation. T-bills are a great option for those who are looking for a low-risk investment.

2.Do I need to have a bank account to invest in Kenyan T-bills?

You do not need to have a bank account. However, you will need to have a CDS account, which is a Central Depository System account. This is a type of account that is used to hold and trade securities, including T-bills.

3. Can I buy Kenyan T-bills online?

The answer is yes; you can buy Kenyan T-bills online through the Central Bank of Kenya website. You will need to create an account on the website and then you can buy T-bills using your CDS account.

4. Do I need to pay taxes on the interest earned from Kenyan T-bills?

 Yes, you do need to pay taxes on the interest earned from Kenyan T-bills. In Kenya, T-bills are subject to withholding tax of 15% on return. So, if you earn KSh 1,000 in interest from your T-bills, you will need to pay KSh 150 in taxes. This is something to keep in mind when considering the overall return on your investment.

5. What happens if I sell my Kenyan T-bills before maturity?

When you sell your T-bills before maturity, you may receive more or less than the face value of the T-bills. This is because T-bills are subject to market fluctuations, which means their price can change over time. So, if you need to sell your T-bills before maturity, you should be aware that you may not get back the full amount you paid for them.

6.What is the difference between T-bills and T-bonds?

The main difference between T-bills and T-bonds is the length of time until maturity. T-bills have a maturity of one year or less, while T-bonds have a maturity of more than one year. Both T-bills and T-bonds are issued by the government and are considered safe investments.

7.Can I get my money back early if I need it?

Yes, you can sell your T-bonds early if you need to access your money. However, you may not get back the full amount you paid for them.

8.Are Kenyan T-bills DPF insured?

In Kenya, T-bills are not DPF insured, but they are considered a very low-risk investment. They are guaranteed by the Kenyan government, which has a very good credit rating, which means that the chances of not getting paid back are very low.

DPF-Deposit Protection Fund (DPF)- This is a government agency in Kenya, that was established in 2006 and is run by Central Bank of Kenya, to protects bank deposits of up to KSh 500,000 per depositor, per bank in the event of a bank failure.

9.Can I invest in Kenyan T-bills if I'm not a Kenyan citizen?

Yes, you can invest in Kenyan T-bills if you are not a Kenyan citizen. There are no restrictions on who can invest in T-bills. However, you will need to go through a registered broker in order to purchase T-bills.

10.How are Kenyan T-bills priced?

The price of Kenyan T-bills is determined by an auction process, which is conducted by the Central Bank of Kenya. The auction is open to all interested investors, who can submit bids to buy T-bills at a specific price. The winning bids are determined by the highest price offered for the T-bills.

11.How often are Kenyan T-bills issued?

Kenyan T-bills are issued on a weekly basis, every Tuesday. The Central Bank of Kenya announces the amount of T-bills to be issued and the maturity dates, and interested investors can submit bids. The auction process is completed by Thursday, and the successful bidders are notified on Friday.

13.Can I buy Kenyan T-bills with foreign currency?

Yes, you can use foreign currency to purchase Kenyan T-bills. The Central Bank of Kenya allows investors to use foreign currency, such as US dollars, euros, or pounds, to purchase T-bills. The T-bills will then be denominated in Kenyan shillings.

14.How do I know if Kenyan T-bills are a good investment for me?

To determine if Kenyan T-bills are a good investment for you, you'll need to consider your investment goals and risk tolerance. T-bills are considered low-risk investments, but the returns may be lower than other types of investments. It's important to consult with a financial advisor to determine if T-bills are right for you.

15.What is the yield on Kenyan T-bills?

The yield is determined by the auction process. The average yield is calculated based on the winning bids. The yield will vary depending on market conditions and the amount of T-bills being auctioned. However, the yield is typically in the range of 8-12%.

Pros of investing in T-bills.

Ø  T-bills are very safe investments, with very little risk of default.

Ø  They offer a relatively high rate of return compared to other low-risk investments.

Ø  T-bills are easy to buy and sell in the secondary market.

Ø  They are a good way to diversify your portfolio.

Ø  T-bills offer liquidity, meaning you can sell them quickly if you need to access your money.

Cons of investing in T-bills.

Ø  T-bills are subject to inflation risk, meaning that the value of your investment can be eroded by inflation.

Ø  They have a fixed interest rate, so you cannot benefit from increases in interest rates.

Ø  They have a relatively short maturity, so you may need to reinvest your money more frequently.

Ø  T-bills may not be the best investment for long-term goals, such as retirement.

T-bills offer investors peace of mind in uncertain Times-Peter Lynch

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