Investing in government securities is widely considered one of the safest ways to grow your money while keeping your capital secure. It primarily involves investing in treasury bills and bonds. These instruments appeal to both beginners taking their first steps into investing and experienced investors looking to balance their portfolios. In times of economic uncertainty, their low-risk nature makes them even more attractive, offering a sense of stability when other investments become unpredictable.
Government bonds and treasury bills (T-Bills) work in a simple way: you lend money to the government, and in return, the government agrees to pay you back with interest after a set period. Because the government backs these investments, the chances of losing your money are extremely low. This makes them a great starting point for anyone who wants to invest without taking on too much risk.
This article breaks down everything you need to know before investing in government bonds and treasury bills. You’ll understand different types of treasury bills and treasury bonds, the benefits of investing in government securities, the risks associated with the investment of government securities, and a step-by-step guide on how to make your first investment in a government security.
Understanding Government Securities
Treasury bills and government bonds are both types of loans that investors provide to the government. In return, the government uses this money to fund national projects and maintain economic stability. Although both are considered low-risk investments, they differ in their duration and the way they generate returns. Knowing these differences is essential for choosing the option that best fits your financial goals.
Treasury bills are short-term securities issued for periods of a few weeks to one year. They work differently from many other investments because they do not pay interest regularly. Instead, T-Bills are sold at a price lower than their face value. When the bill matures, you receive the full face value, and the profit is simply the difference between what you paid and what you receive at maturity, as Andrew (2025) explains. Their short timelines and guaranteed repayment make T-Bills suitable for conservative investors or anyone looking to keep money in a safe place for a brief period.
A study by James (2025) highlights that “Government bonds are long-term securities that can last several years or even decades. Unlike Treasury bills, bonds pay interest known as coupon payments at regular intervals until maturity.” Because they are interest-bearing and run over a more extended period, government bonds offer a steady stream of income. They are helpful for long-term planning and are often chosen by investors who want stable returns while balancing more unpredictable investments in their portfolio.
Types of Treasury Bills in Kenya
Treasury Bills are an essential part of Kenya’s investment landscape, offering a secure and efficient way for investors to earn short-term returns while supporting government financing. The following are the main types of treasury bills available in the Kenyan market, as per Equity Bank.
a) The 91-Day Treasury Bill
The 91-day T-Bill is the shortest Treasury bill available in Kenya, maturing in just three months. It appeals to investors who want quick, predictable returns and the flexibility to reinvest frequently. Banks, money-market funds, and individuals who wish to manage short-term cash often choose this option. Because of its short duration, CBK also uses it frequently to regulate the money supply and maintain liquidity in the financial system.
b) The 182-Day Treasury Bill
The 182-day T-Bill matures in six months and offers a balance between short-term flexibility and slightly higher potential returns. It suits investors who prefer a medium holding period without tying up their funds for too long. Yields on this T-Bill are generally higher than the 91-day option, depending on market conditions. It is commonly chosen during periods of stable interest rates or when investors expect rates to rise in the near future.
c) The 364-Day Treasury Bill
The 364-day T-Bill has the longest maturity among Kenyan T-Bills, lasting a full year. It typically offers higher returns because investors commit their money for a longer period. This makes it attractive to companies like pension funds, insurance companies, and individuals who do not need immediate liquidity. Since it locks in the interest rate for a whole year, many investors prefer it when they expect interest rates to fall in the future.
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Types of Treasury Bonds in Kenya
Kenya offers a wide range of Treasury Bonds to meet different investment needs and government financing goals. These bonds vary in maturity, structure, and purpose, giving investors multiple options depending on their risk appetite, time horizon, and income expectations. All Treasury Bonds are issued by the National Treasury and sold through the Central Bank of Kenya (CBK). Below are the main categories available in the Kenyan market. As per Michael (2025)
a. Fixed Coupon Bonds
Fixed coupon bonds pay the same interest rate throughout their entire term. This consistency makes them appealing to investors who value predictable income. Interest is paid twice a year, and the bond can run for periods ranging from 2 years to as long as 30 years. Because interest rates do not change, these bonds offer stability, especially for those planning long-term financial goals.
b. Infrastructure Bonds
Infrastructure bonds are issued to finance major public projects, such as roads, energy systems, and water infrastructure. One of their biggest advantages is that the interest they pay is often tax-exempt for eligible investors, making them more attractive than many other bond types. This type of bond usually has medium- to long-term maturities. It attracts strong demand due to its favorable tax treatment.
c. Floating Rate Bonds
Floating-rate bonds have interest rates that change over time. The return is adjusted periodically based on a benchmark rate, often the 91-day T-Bill rate. This means investors benefit when market interest rates rise, as their payments increase as well. These bonds are suitable for investors who prefer flexibility and want protection against rising interest rates.
d. Zero-Coupon Bonds
Zero-coupon bonds are issued at a discount to their face value and do not pay interest during their life. Instead, the investor earns a lump-sum return when the bond matures at full value. Because they have no periodic payments, they are ideal for long-term investors who have a specific future financial need, such as education fees or a retirement fund, and want a predictable payout at maturity.
e. Savings Bonds
Savings bonds are designed to make government securities more accessible to small investors. They have lower minimum investment requirements and a simple structure, making them easy to understand and purchase through CBK channels. These bonds support financial inclusion by giving more Kenyans the opportunity to participate in safe, government-backed investments.
Step-by-Step Guide to Investing In Government Securities in Kenya
Starting your investment journey with government security in Kenya is straightforward once you understand the process. The Central Bank of Kenya (CBK) has made it accessible to anyone. Below is a clear, step-by-step guide to help you get started confidently, as provided by Anthony (2022)
Step 1: Open a CDS Account
Before buying government securities, you must have a Central Depository System (CDS) account. It serves as your investment wallet where the CBK records and tracks your holdings. Find a step-by-step guide to opening a CDS account.
Step 2: Watch for New Investment Opportunities
CBK regularly announces new securities: Treasury Bills are announced weekly, and Treasury Bonds are announced monthly. These announcements are published on the following sites:
- On the official CBK website
- In newspapers like the Daily Nation and Business Daily
- Through your bank or licensed investment professionals
The minimum investment amount is KES 50,000 for bonds and KES 100,000 for T-Bills. This information helps you choose the option that best aligns with your financial goals and time horizon.
Step 3: Fill Out the Application Form
Once you identify a bond or bill you’d like to buy, the next step is completing a short application form. You will need to provide:
- Your CDS account number
- Personal and bank details
- The investment amount
- Your bid rate (if unsure, choose the “average rate” option)
- Whether you want your investment to roll over at maturity
Applications must be submitted by 2:00 PM on the Tuesday before the auction.
Step 4: Wait for the Auction Results, Then Make Payment
After the auction closes, CBK reviews all bids and sends out results. If your bid is successful, you will receive instructions on completing payment. Payment is due by 2:00 PM the following Monday. Payment methods:
- Below KES 1 million: Cash or banker’s cheque
- KES 1 million and above: RTGS transfer through your bank
It’s important to pay on time. If you miss the deadline, CBK may restrict your participation in future auctions.
Step 5: Sit Back and Watch Your Money Work
Once payment is confirmed, your investment starts earning. For Bonds, you’ll receive interest payments every six months directly into your bank account. On the other hand, for T-Bills, you receive your full return in the form of principal plus profit as a lump sum when the bill matures. CBK also sends regular statements showing your holdings and earnings. When your bond matures, you can choose to cash out or reinvest through a simple rollover request.
Benefits of Investing in Government Securities
Government bonds and treasury bills remain popular choices for investors who value stability, steady growth, and disciplined financial planning. Their low-risk nature makes them a strong foundation for building a secure investment portfolio. Below are the key benefits you may gain by investing in them.
- Predictable Income
Government bonds provide regular, predictable interest payments, either fixed, allowing investors to enjoy a steady income stream. Treasury bills, while they do not pay periodic interest, still offer certainty because you know exactly how much you will receive at maturity. This reliability makes planning much easier.
- Capital Preservation
For investors who want to protect their principal, treasury bills are especially effective. Their short holding periods and transparent auction pricing reduce the chances of losing value. This makes them an excellent place to store funds temporarily or safeguard capital during uncertain economic periods.
- Diversification
Including government securities in your portfolio can help reduce overall risk. They often perform differently from stocks or other higher-risk investments. By adding them to your mix, you create a more balanced portfolio that can better withstand market volatility.
- Liquidity
Government bonds and treasury bills are generally easy to sell when needed. Active secondary markets exist in many countries, allowing investors to convert these securities into cash with little difficulty. Short-term maturities also give T-Bill investors even more flexibility.
- Safety.
One of the strongest advantages of government securities is their high level of safety. Because they are backed by the full faith and credit of the government, the risk of default is extremely low. This makes them far more secure than corporate bonds or other private investments, giving investors’ confidence that their money will be repaid.
Risks of Investing in Government Bonds and Treasury Bills
Although government securities are considered some of the safest investments available, they are not entirely risk-free. Understanding these risks helps you make informed decisions and choose products that match your financial goals. Being aware of potential challenges ensures that your investment strategy remains balanced and realistic.
- Interest Rate Risk
Bond prices and interest rates move in opposite directions. When interest rates rise, the value of existing bonds tends to fall. This effect is stronger for long-term bonds because they lock in rates for many years. Treasury bills are less affected because they mature quickly, making them less sensitive to rate changes.
- Inflation Risk
If inflation rises faster than your bond’s fixed interest payments, the real value of your returns decreases. In simple terms, your money may buy less in the future. Inflation-linked bonds can help reduce this risk, though they may involve different pricing or tax considerations.
- Currency Risk
If you invest in government securities issued in a foreign currency, exchange rate movements can impact your returns. Even if the investment performs well, a drop in the foreign currency’s value compared to your own can reduce your overall gain.
- Liquidity Risk
Government bonds and bills are generally easy to sell, but not always. Specific issues may attract less trading activity, or the market may slow down during uncertain times. This can make it harder to sell quickly or may require you to accept a less favorable price.
- Opportunity Cost
Government securities often offer lower returns than stocks or other higher-yield investments. During periods of low interest rates, choosing these safer products may mean missing out on potentially higher profits elsewhere.
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Conclusion
Investment in Government securities is a disciplined path to investing, as they offer predictable income, easy diversification, and are highly liquid and safe, as they are exposed to low risk. There are a variety of government treasury bills to invest in, like 91-day, 182-day, and 364-day treasury bills. On the other hand, you can invest in floating, zero-coupon rates, savings bonds, and infrastructure bonds. To start your investment process, you will need a straightforward set of steps, such as opening your CDS account, monitoring new investment opportunities, completing the application form, waiting for auction results, and making payments. As you invest in government securities, it’s crucial to understand the risks that are associated with this kind of investment, as they affect the amount of returns you will get from the investments. They include currency risks, inflation risks, opportunity risks, liquidity risks, and interest rate risks. Start investing in government securities and begin receiving your returns, while considering the above risks.
