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By Steve Umidha
Kenya will sell a five-year fixed coupon Treasury bond worth Sh 50 billion this month according to Central Bank of Kenya (CBK).
The bank said in a statement it would receive bids for the bond until May 5, and auction it a day later.
Treasury bonds are a secure, medium- to long-term investment that typically offer you interest payments every six months throughout the bond’s maturity. The Central Bank auctions Treasury bonds on a monthly basis, but offers a variety of bonds throughout the year, so prospective investors should regularly check for upcoming auctions.
Most Treasury bonds in Kenya are fixed rate, meaning that the interest rate determined at auction is locked in for the entire life of the bond. This makes Treasury bonds a predictable, long-term source of income. The National Treasury also occasionally issues tax-exempt infrastructure bonds, a very attractive investment.
Individuals and corporate bodies can invest in Treasury bonds as a nominee of a commercial bank or investment bank in Kenya, but if you hold a bank account with a local commercial bank you can also invest directly through the Central Bank and avoid additional fees.
How to calculate interest of Treasury bond
Take the number of days until the Treasury bill matures, and multiply it by the interest rate in percent. Take the result and divide it by 360, as the Treasury uses interest-rate assumptions using the common accounting standard of 360-day years. Then, subtract the resulting number from 100.