The Central Bank of Kenya(CBK) received bids totaling KSh 23 billion against an advertised amount of KSh 24 billion at this Thursday’s Treasury Bill Auction, representing a performance of 95.8%. The CBK accepted KSh 20.4 billion at this auction, the first time in weeks that the primary T-bills market has been undersubscribed.
CBK offer to investors
The state fiscal agent offered interest rates for the 91-day, 182-day, and 364-day T-bills at 13.7332%, 13.4911%, and 14.0140% at this auction compared to 13.4754%, 13.2758% and 13.7459% respectively at the previous auction.
Investors continue to show their preference for the short-term 91-day treasury bills, which received bids worth KSh 18.2 billion out of the advertised amount of KSh 4 billion, 455.44% oversubscription, with the CBK accepting KSh 15.6 billion.
The least attractive instrument was the one-year T-bills which received bids worth KSh 2.2 billion out of KSh 10 billion offered, an underperformance of 21.99%.
During the Treasury bonds tap sale of August 24th, the 2-year fixed-rate Treasury bond and the 5-year fixed-rate Treasury bond received bids totaling KSh 23.6 billion against an advertised amount of KSh 21 billion, representing a performance rate of 112.4 percent.
The CBK accepted KSh 23.5 billion at this T-Bond tap sale. Investors were offered a coupon rate of 16.9723% and 16.8440% for the two-year and five-year bonds respectively
Government securities are considered risk-free investments. Government securities provide one with a return and/or a consistent source of income over a specified period of time.
Investors who buy these securities are loaning money to the Government, which promises to repay those investors after a specified period of time, called maturity.
Investing in Government Securities can be undertaken through the Central Bank directly or through a commercial bank or an investment bank.
Retail investors can use the New App DhowCSD run by CBK, to open an account, invest in and pay for Treasury Bills and Treasury Bonds.
Treasury Bills are a short-term investment, with maturities of 91 days, 182 days, and 364 days. This means that if you invest money in a Treasury Bill, you will receive that money back within three months, six months, or one year, depending on the bill chosen.
Investors make money on Treasury Bills because they are sold at a discount. If one likes to purchase a Treasury bill, one must invest a minimum of KSh 100,000.
While Commercial Banks, Corporate Entities, and Pension Schemes are some of the largest investors in Government Securities, individuals can invest directly through the Central Bank.
Investing in Government securities requires one to have a bank account with a commercial bank in Kenya, and you must open a CDS account with the Central Bank.
Kenyans and foreign investors who meet these qualifications are free to invest in Government securities directly with the Central Bank.
Those who do not wish to open a CDS account with the Central Bank can still invest by opening a client account with their commercial bank, which will invest on their behalf.
However, while opening a CDS account is free, commercial banks typically have fees associated with client accounts.
Treasury Bonds are traded on the secondary market, giving bondholders the opportunity to receive money for their security without rediscounting.
Treasury Bills, however, are not traded on the secondary market. Both types of securities can be transferred to other parties.
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