Dhow CSD

How to buy Treasury Bills and Bonds via CBK Dhow CSD

Treasury bonds and bills are types of debt securities that are issued by the government. When you buy a treasury security, you are essentially lending money to the government which promises to pay you back on a certain date.

They are good investment options for passive and risk-averse investors since they have fixed returns with high liquidity meaning that they can be converted into ready cash easily without affecting their market price. However, in as much as they don’t yield high returns compared to other investment options. They are ideal for people looking to keep their money safe and earn a consistent income over a specific period of time.

Treasury Bonds vs Treasury Bills

There are three main differences between Treasury bonds and Treasury bills.

  1. Treasury bills are a short-term investment offered every week, with maturities of 91 days, 182 days, and 364 days meaning that if you invest in a Treasury bill, you will receive your money within 3 months, 6 months, or 12 months, depending on the bill you choose. On the other hand, Treasury bonds are medium to long-term investments that are typically offered every month with maturities of every six months throughout the bond’s maturity. Their maturity can range from one year to 30 years.
  2. If you want to purchase treasury bills, you must invest a minimum of Ksh 100,000 which must be invested in denominations of Ksh 50,000. For treasury bonds, you must invest a minimum of Ksh 50,000.
  3. Bills are not tradable on the secondary market, while bonds can be traded on the secondary market. This means that if you want to sell your bills before maturity, you will have to sell them back to the government whereas bonds can be sold to another investor on the secondary market.

Process

CBK launched a portal that allows Kenyans to trade in Treasury bonds and bills through an app known as the CBK DhowCSD. You can download the app on the Playstore, Appstore or access it through the CBK website.

When you are ready to invest, you should begin by monitoring the upcoming bond prospectuses available on the CBK website or app, to find the right opportunity for you. The app provides real-time information on government securities’ prices and trading volumes, which is very helpful for decision-making.

You can also find information about the bonds and bills available in the Daily Nation Newspaper. In the prospectus, you will find information about the different bonds on offer, including the bonds’ durations until maturity, or tenor, and the coupon rates. Coupon rates refer to the interest payments you will receive every six months.

To invest in bonds and bills, you can follow these easy steps:

  1. To create an individual/joint account, you need to upload the following documents on the site.
  • User type (Individual or Corporate)
  • Name, address, and other biodata
  • Valid mobile number
  • Investor Settlement account (Bank Account number)
  • Investor settlement account title (Account name as per bank details)
  • Settlement bank (commercial bank)
  • A clear, coloured Passport size photo
  • Identification Document (National ID/Passport/Alien card)
  • KRA pin
  • KRA exemption certificate where applicable.

2. Once an individual has created their Profile on the Investor Portal or Mobile App, they shall receive an email notification.

3.To create a joint account, each Jointee must first have an individual, existing and Active profile on the Investor Portal/Mobile Application which is then used to create a joint account via the Investor Portal.

4. To change your email or settlement details, you need to fill out the relevant form on the website or alternatively, contact a CBK admin via Telephone at 0709 081 222 or Toll-Free 0800 720 222.

5. Select the government bills or bonds that you want to trade then enter your bid or ask price. The bid price is the price that you are willing to pay to buy the securities. The ask price is the price that you are willing to sell the securities for.

6. Submit your trade order. This is an instruction to the Dhow CSD to buy or sell securities at the specified price. Once

7. You can then monitor the status of your trade order on the app.

8. Once your trade order is executed, you will receive your securities in your CDS account.

Payment Method

A successful bidder must pay the total amount given to him/her by 2.00 pm on the value date, usually on Mondays. If that Monday is a holiday the payment period is extended up to Tuesday at 2.00 p.m. Any investor who defaults in payment may be suspended from participating in future auctions for some specified period.

Payments can be made in Cash or Bankers cheque for amounts less than Ksh 1 million, Direct debits (for banks only). Investors can also choose to roll over their securities into a new forthcoming issue and in this case, they have to complete an application form giving rollover instructions and submit it to the Central Bank before the set deadline specified in the results of the preceding auction.

Amounts equal to or more than Ksh 1 million can only be paid electronically through the Real Time Gross System (RTGS) known as the Kenya Electronic Payment and Settlement System (KEPSS) through commercial banks.

During payment, the following details are required: Name, Reference Number, CDS account Number (also called Portfolio Number), and Virtual Account Number when using RTGS.

After payment, Investors will receive a statement showing their holdings in the Central Depository (CDS) registry at the Central Bank.

Once the bonds or bills mature, the CBK remits electronically the face value of the maturing bond or bills directly to the investor’s commercial bank account on the due date. The investor’s CDS account is debited by the same value as the security, and statements are sent to the investor showing the new position.

Investors can opt to trade their bonds before maturity at the NSE. They may pledge them as collateral security against credit facilities (loans), and may also be transferred among holders of CDS accounts. CDS Statements are adjusted accordingly to reflect these transactions. Investors who want to redeem their bills before maturity can rediscount them. This means that they can sell their securities back to the CBK but at a punitive rate which is intended to discourage people from doing so.

To rediscount a treasury bond, you need Nairobi Stock Exchange together with CDS statements, a photocopy of the identity document, a pay-in slip, and a certificate of incorporation in case of companies.

To rediscount a treasury bill, you need to send a written request to the Bank together with CDS statements, a photocopy of the identity document, a pay-in slip, a letter of incorporation for companies and a duly filled sale confirmation form.