How Frequent are Payments for Treasury Bills and Treasury Bonds in Kenya

Govt. Securities Coupons

Before getting to the process, a few key definitions:

• Face value – This is the amount the bill (think about it as a loan) is worth. For example, if you want to buy T-bills worth KES 100,000, that amount is the face value. It does not mean that you will pay KES 100,000 though, it is just a little bit more complicated than this. See the next definition.

• Discount – Instead of investing your 100,000 shillings and getting X% in interest, treasury bills are sold at a discount of the face value, then you get the full face value of your investment at the end of the period. E.g., if the discount for a 91-day T-bill is 7%, it means you pay KES 93,000 when you invest, then after 91 days, you receive KES 100,000.

• Maturity – This is the period between when you invest and when you get your money back. As highlighted above, treasury bills issued by the government of Kenya have a 91-day, 182-day, and 364-day maturity period. Usually, the longer the maturity period, the higher the discount, though this also depends on the demand and supply of money during the issue.

In Kenya, the payment frequency for Treasury Bills and Treasury Bonds is as follows:

1. Treasury Bills

Treasury Bills are short-term securities, typically with maturities of:

• 91 days
• 182 days
• 364 days

There are no periodic payments during the life of a Treasury Bill. Instead:

• They are purchased at a discount.
• The investor receives the full face value at maturity.
• The difference between the purchase price and face value represents the interest earned.

2. Treasury Bonds

Treasury Bonds are medium to long-term securities, with maturities ranging from:

• 2 years to 30 years

Most Treasury Bonds in Kenya pay interest on a semi-annual basis, meaning:

1. Two payments per year, one every six months.
2. The interest rate is usually fixed, providing consistent payments