Beyond Stocks: T-Bills and Bonds
Beyond Stocks: Government Securities
True diversification goes beyond just owning different stocks. Adding government securities like Treasury bills and bonds to your portfolio introduces a fundamentally different asset class that behaves differently from equities.
Treasury Bills (T-Bills)
T-bills are short-term government securities sold at a discount and redeemed at face value. They come in three tenors:
- 91-day T-bill — Matures in about 3 months, lowest yield
- 182-day T-bill — Matures in about 6 months, moderate yield
- 364-day T-bill — Matures in about 1 year, highest yield among T-bills
T-bills are considered risk-free because they are backed by the Kenyan government. Recent yields have ranged from 9% to 16%, which is quite competitive. The minimum investment is KES 100,000.
Government Bonds
Bonds are longer-term securities (2-30 years) that pay regular interest (coupon payments). They offer higher yields than T-bills in exchange for locking your money up for a longer period.
Infrastructure Bonds
These are special government bonds whose proceeds fund infrastructure projects like roads, energy, and water. Their key advantage is that the interest income is tax-exempt, making the effective return even higher. An infrastructure bond yielding 14% tax-free is equivalent to a regular bond yielding about 16.5% before tax.
How to Access Government Securities
- Central Bank of Kenya (CBK) — Open a CBK account and bid directly through their online platform
- Mobile platforms — M-Akiba allows you to buy government bonds starting from as little as KES 3,000 via M-Pesa
- Stockbrokers — Your NSE broker can also help you access bonds and T-bills
- Banks — Many commercial banks facilitate T-bill and bond purchases
A balanced portfolio might allocate 20-40% to government securities, providing stable income and capital preservation to offset the volatility of your equity holdings.