Government securities such as bonds are tools used by the government to raise funds. Hence, below is a simple guide on how to buy Kenya government securities.
Investing in these securities is among the best investment options in the country. This is because of the security and returns you get from these assets.
Types of Government securities in Kenya
The government offers two types of securities that you can invest in.
1. Treasury bills
These are short-term government securities that range between 3 months and 1 year. The minimum amount you can invest in treasury bills is 100,000 shillings.
2. Treasury bonds
These are long-term government investment securities that range between 1 year to 30 years. Normally, the minimum amount you can invest in treasury bonds is 50,000 shillings.
However, the interest amount is paid on a half-yearly basis, and the principal is at the end of the bond tenor.
Requirements to buy Kenya government securities
- Have a CDS account
- Must have a Kenyan bank account
- Required minimum capital
- Be at least 18 years of age
Benefits of buying Kenya government bonds
1. Low risk– Government securities are low-risk investment assets due to the minimal chances of default by the government.
2. High income – These assets have some of the best returns in the market compared to their peers such as fixed deposits.
3. Future planning– Government securities come with a fixed duration and interest. This enables you to plan as you already have the details such as expected income and by what date.
4. Patriotism – Government securities investment allows you to participate in building the country. To most, this is an ideal way to show patriotism.
5. Tax-free bonds – Some bonds such as infrastructure ones attract no tax. This is a key to growing your income from these assets. These types of bonds are also some of the most sought-after in the market.
6. Secondary market trading – It is possible to trade your treasury bonds on the secondary market. This allows access to funds without having to pay to discount them. Another capability is transferring to a third party.
How to buy Kenya government securities
The process of buying Kenya government securities is simple as long as you meet all the set requirements;
Step 1: Open a CDS account – You need a CDS account if you want to directly buy these bills and bonds. You can get one from the central bank of Kenya for free. Some of the key details required to get it to include:
- Bank account number
- KRA pin
- Complete application form
- National identity card
Step 2: Capital – You should have the minimum amount of capital required to buy either treasury bills or treasury bonds. The minimum amount is 100,000 shillings for treasury bills and 50,000 shillings for treasury bonds.
Step 3: Bid in the market- Normally, investing in government securities happens through an auction. Hence, you should always be on the lookout to bid as this happens on a monthly basis. You should visit the central bank portal regularly to check the ongoing auctions.
Bidding doesn’t mean you will get all that you need due to various factors such as oversubscriptions of high rates.