All you need to know about treasury bonds(Kenya) THREAD...
Objectives:
*What are treasury bonds(t-bonds)?
*Requirements to acquiring them?
*Types of t-bonds with a focus on infrastructure bonds?
*Adv. & dis-adv. of t-bonds?
*Difference between t-bills and t-bonds?
#AprilFoolsDay
Objectives:
*What are treasury bonds(t-bonds)?
*Requirements to acquiring them?
*Types of t-bonds with a focus on infrastructure bonds?
*Adv. & dis-adv. of t-bonds?
*Difference between t-bills and t-bonds?
#AprilFoolsDay
T-bonds are government issued middle to long term investments with a maturity period of upto 30 years. It has the longest period of maturity compared to all treasury securities. It also offers high rate of return as a compensation of the time period.
Interest is issued twice a year, that is after every 6 months and it is at a fixed rate(does not flactuate during the whole time period). They are auctioned by CBK monthly, meaning every month a bond is made public. CBK website updates on this regularly. So google tu utapata.
Now there is a difference between treasury bills and bonds. T-bill are short term investments they mature in time period of 3, 6 or 12 months. Mostly written as 91-days t-bills, 182-days t-bills and 364-day t-bills.
How t-bills work? Technically you buy it at a lower price called discount price and upon maturity your money is returned at face value. What i mean is exa you give the government ksh 90/= and the day of maturity it will give you back ksh.100. Why 90 and not 80 or any other price?
One week before the closure date, a bidding auction takes place, they are two types:competitive and non-competitive bidding. I will expound on t-bills in the future as a thread on its own.
Back on t-bonds. There are different types of govt bonds: infrastructure bonds, zero coupon bonds(short term investments)etc. By the way short term means it matures in a short period of time. Long-term is the reverse. I hope we are ok? Too much info? Its okay,🤗 read & repeat.
I will focus on infrastructure bonds. After the national budget is read, certain amount of funds are allocated to dif project in this instance, infrastructure. Sasa what the govt does is instead of getting foreign loans for this the govt chooses to borrow from its own people.
How it works? Most T-bonds are purchased at an initial price of 50,000 and then multiples of 50,000 EXCEPT infrastructure bonds, the initial purchase price is 100,000 and multiples of 50,000.
ADVANTAGES:
*Uzuri ya infrastructure bond is that tax is exempted. INTEREST HAITOLEWI TAX.
*It is a good retirement plan. What most people do is you purchase them with 3 months separation period. It allows a repeat cycle, by the time moja interest inaiva io ingine iko kwa njia
*Uzuri ya infrastructure bond is that tax is exempted. INTEREST HAITOLEWI TAX.
*It is a good retirement plan. What most people do is you purchase them with 3 months separation period. It allows a repeat cycle, by the time moja interest inaiva io ingine iko kwa njia
Adv.
* It is a income generating plan, interest guaranteed, and honestly you do not do much work compared to maybe investing in stocks which are highly highly volatile(risky).
* It is a income generating plan, interest guaranteed, and honestly you do not do much work compared to maybe investing in stocks which are highly highly volatile(risky).
Dis:
*Fixed interest- lets say you had a business there are years when you can get 17/18/12 % huku its just fixed.
* Time value of money due to inflation. So when you place lets say 1M at the end of the time period- if you wait for maturity period expiry date utarudishiwa 1m.
*Fixed interest- lets say you had a business there are years when you can get 17/18/12 % huku its just fixed.
* Time value of money due to inflation. So when you place lets say 1M at the end of the time period- if you wait for maturity period expiry date utarudishiwa 1m.
Good Example is compare things you could do with 1M in1990 compared to 1M in 2021.
This is why bonds have high interest rates.
This is why bonds have high interest rates.
* Biasness in regards to wealth status. I will explain if initial price is 100,000 then low than average income people are exempted. Watu wangapi wakona more than 100,000ksh to just set aside & forget about it?
NB: for good interest returns then you need to invest a chunk amount
NB: for good interest returns then you need to invest a chunk amount
Procedures on purchasing t-bonds.
*You need a CDS account, with the Central Bank. It is free. CDS account for stocks is NOT the same as the one for purchasing bonds.
You can open an account as joint(married folks) or individually.
*You need a CDS account, with the Central Bank. It is free. CDS account for stocks is NOT the same as the one for purchasing bonds.
You can open an account as joint(married folks) or individually.
*Before you open an account you need to have a bank account with a kenya commercial bank.
*Must complete a CDS account specimen signature mandate card(jina refu-karatasi fupi),should have no errors, no folds/disfigured, filled in capital block letters & contain 2 signatures.
*Must complete a CDS account specimen signature mandate card(jina refu-karatasi fupi),should have no errors, no folds/disfigured, filled in capital block letters & contain 2 signatures.
There are also other requirements, if i wrote all of them hii thread haitaisha. Hii form iko centralbank.go.ke website. I do not know whether its legal to post it or not. Not taking chances na sina pesa ya bail. Mimi venye ni mwoga, nikipelekwa jela siwezi survive😑.
Next you need to complete a treasury bond application, info includes:
face value amount you want to invest, duration, treasury bond you want , issue no etc. Personal info like CDS account no. Info about yourself like names & tel no. Etc.
face value amount you want to invest, duration, treasury bond you want , issue no etc. Personal info like CDS account no. Info about yourself like names & tel no. Etc.
I hope this gives you a basic foundation/summary of t-bonds. There are so many websites to read more on.
I cover finance topics and advocate for financial literacy on my Timeline. Ask questions, retweet and follow if finance interests you and for others to learn.
I cover finance topics and advocate for financial literacy on my Timeline. Ask questions, retweet and follow if finance interests you and for others to learn.
Loading suggestions...