Introduction: Why Treasury Securities Matter Now

Kenya's Treasury Bonds and Bills have long been trusted by banks, insurers, and investors seeking safe returns. But in 2024–2025, these instruments have taken center stage in ways that fintech founders, CEOs, and finance professionals can't ignore. Surging interest rates and digital access platforms have transformed government securities from a sleepy corner of finance into an attractive, accessible opportunity. This guide provides an updated look at Treasury bills and bonds in Kenya – what they are, what's new, and how fintech-savvy individuals and companies can leverage them for growth and stability.

Treasury Bills vs. Treasury Bonds: The Basics

Treasury Bills (T-Bills) are short-term government securities that mature in a year or less. In Kenya, the Central Bank (CBK) traditionally issued 91-day, 182-day, and 364-day T-Bills. (Notably, from 2025 the 364-day bill is being phased out to reduce short-term debt.) T-Bills do not pay periodic interest; instead, they are sold at a discount to their face (par) value. For example, an investor might pay KES 95,000 for a 1-year bill that will pay KES 100,000 at maturity – the KES 5,000 difference is the earned interest. Because of their short tenor, T-Bills are often seen as low-risk, quick-return investments – ideal for parking funds short-term. They are auctioned every week (typically on Thursdays), providing frequent investment opportunities.

Treasury Bonds (T-Bonds) are the medium to long-term instruments, with maturities ranging from 1 year up to 30 years. Most Kenyan T-Bonds are fixed-rate, meaning the interest (coupon) rate is set when the bond is first issued and remains the same throughout its life. Investors in bonds receive interest payments every six months (semi-annually), and the principal (face value) is paid back at maturity. For example, a 5-year bond might pay a 12% annual coupon, so an investor who buys KES 100,000 face value would get KES 6,000 every six months, and the KES 100,000 back after 5 years. The CBK auctions bonds less frequently than bills – usually monthly (with specific bonds offered as per a published schedule). Bonds are used to finance longer-term government projects, including special Infrastructure Bonds earmarked for development projects, which come with a big perk: their interest is tax-exempt (no withholding tax)

Key Differences at a Glance:

Recent Developments (2024–2025): Market Trends and Data

The past two years have seen significant shifts in Kenya's government securities market, driven by economic conditions and policy changes:

Interest Rate Swings

In 2024, Kenya's T-Bill rates climbed dramatically. By July 2024, the 91-day T-Bill was about 16%, with the 182-day at 16.8% and 364-day near 16.9% – extraordinarily high yields by historical standards. This was fueled by government borrowing needs and tighter liquidity. These attractive rates spurred many investors (including retail and fintech treasuries) to rush into T-Bills for the high returns. However, heading into 2025, rates have started falling again as the Central Bank eased monetary policy. By February 2025, the 91-day yield dropped below 9% (for the first time since late 2022), with the 182-day around 9.4% and the last issued 364-day about 10.6%. The decline is partly due to CBK actively rejecting expensive bids to lower the government's borrowing cost and a cut in the benchmark interest rate. For bonds, yields also fluctuated – long-term bond auctions in late 2024 saw rates well into double digits (some infrastructure bonds had coupons in the 14–15% range). The trend now is moderating yields as the government shifts to longer debt and aims to bring borrowing costs under 10%.

Phasing Out the 364-Day Bill

In a bid to manage debt maturity risk, the National Treasury announced in early 2025 that it will stop issuing new 364-day T-Bills. Investors will now only see 91-day and 182-day bills in auctions. This reform is intended to lengthen the debt profile and reduce the frequent refinancing hump caused by one-year instruments. For investors, this means those who want a one-year risk-free investment might need to either buy two consecutive 6-month bills or consider a short-term bond instead. It's a move that could also push more demand into longer-term bonds, potentially affecting their yields.

Digital Access – DhowCSD and Mobile

A game-changer in accessibility has been the Central Bank's launch of the Dhow Central Securities Depository (DhowCSD) in 2023. This is an online portal and mobile app that allows investors to open a CDS account remotely and bid on auctions directly. Individuals and corporates no longer need to physically fill forms at banks or hire brokers for a basic investment – they can do it all through a smartphone or computer. Additionally, the Treasury Mobile Direct (TMD) USSD service complements this, enabling even those without smartphones or internet to invest via a simple mobile phone menu. These innovations have led to a surge in retail investor participation, leveling the playing field. Banks and intermediaries that used to dominate these markets have noted the change – in fact, retail investors have started to outbid banks on T-Bills in some instances. In response, CBK even eliminated the 0.15% commission that was previously paid to brokers/agents on successful sales, indicating a push toward a more direct model.

Fintech and Mobile Bonds

Kenya was a pioneer with M-Akiba, a special 5-year infrastructure bond launched in 2017 that was sold exclusively via mobile money. The minimum investment was just KES 3,000, dramatically lower than the usual threshold, aiming to include more Kenyans. M-Akiba offered around 10–12% interest, tax-free, and proved that micro-investors would participate if given the chance. While M-Akiba had some challenges (awareness and technical hitches limited its uptake), it laid groundwork for the current digital channels. Today's bond auctions sometimes tap similar retail-friendly approaches – for example, infrastructure bonds often attract thousands of retail bids through DhowCSD. The spirit of M-Akiba lives on in these subsequent efforts to democratize government debt investment.

Market Size and Demand

To appreciate scale – as of January 2024, Kenya's domestic debt was KES 5.89 trillion, of which 85% are Treasury Bonds (KES 4.88 trillion) and about 15% Treasury Bills (KES 844.8 billion). This skew toward bonds reflects heavy government reliance on long-term borrowing. For investors, it also means the secondary market for bonds is larger and more liquid. In recent times, subscription levels indicate strong appetite: T-Bills are often oversubscribed (investors bidding more than offered), though the 364-day was becoming less popular due to expectation of its removal. T-Bonds, depending on tenor and terms, also see robust demand, with infrastructure bonds typically getting very high subscriptions (investors love the tax-free interest). The Central Bank publishes auction results on its website and social media after each auction, letting participants know the cutoff rates and performance.

How to Invest: Step-by-Step for Fintech Professionals

Investing in Treasury bills or bonds in Kenya is a straightforward process that has been greatly simplified by digital tools. Here's how a busy fintech professional or company can get started:

1. Open a CDS Account

You need a Central Depository & Settlement (CDS) account with the Central Bank of Kenya. This is essentially your account for holding government securities (think of it like a demat account for bonds). Opening a CDS account is free. Today, you can do this online via the DhowCSD web portal or mobile app. Alternatively, you can still open one through any Kenyan commercial bank or investment broker, but the direct route is quicker for the tech-savvy. (If you had invested in stocks before, note this is a separate CDS for bonds managed by CBK, not the CDSC for equities.)

2. Choose Your Investment (Bill or Bond)

Keep an eye on what's on offer. Every week, CBK announces the T-Bills on auction (91 and 182-day, plus any special issues). Each month, CBK issues a bond prospectus detailing the bonds on offer – this might be a new bond or a re-opened issue of an existing bond. The prospectus will tell you the bond's term (e.g. 5-year, 15-year), coupon if it's a fixed rate or the formula if floating (though floating rate bonds are rare in Kenya), tax status (e.g. infrastructure bond or not), and the auction and value dates. Fintech professionals can download these from CBK's website or even get alerts from fintech news outlets. Decide which security fits your needs: short-term cash parking – go for T-Bills; longer-term yield or matching a future liability – go for a T-Bond.

3. Competitive vs Non-Competitive Bids

When placing a bid, you have two options:

• Non-Competitive Bid: This is the simplest – you just say how much money (face value) you want to invest, and you agree to accept whatever yield the auction clears at. Non-competitive bids are limited to KES 50,000 minimum and up to KES 20 million for individuals (to ensure big players don't abuse this). Almost all retail investors and smaller institutions use this method. You're guaranteed allocation (up to the cap) at the average accepted rate for that auction.
• Competitive Bid: Here you specify the exact rate/price you want. Big institutions use this to try to lock in higher yields. Minimum for competitive is KES 2,000,000. If you bid too high a rate (wanting a low price), you risk getting nothing if the auction clears lower. If you bid at or below the cutoff, you'll get your amount (maybe pro-rated). For fintech companies investing treasury cash, non-competitive is usually adequate and simpler.

4. Submit the Bid

Using DhowCSD Portal/App or USSD, you can enter your bid. For example, via the app: select the auction (e.g. "182-day T-Bill Issue No. XYZ"), choose competitive or non-competitive, enter the amount, and if competitive, enter your desired rate. Through USSD (Treasury Mobile Direct), you'd follow text prompts to do the same. Traditionally, one could also fill out a physical form and drop it at a CBK or bank branch, but digital channels have made this obsolete for most. After submission, you'll get a confirmation (email or on-screen). Corporate investors can have multi-level approvals for bids – the portal allows, say, a CFO and CEO to both approve a bid placed by a treasury analyst.

5. Auction Results and Payment

CBK will announce results (usually same day for bills, or next day for bonds). You can check on the portal if your bid was successful and how much to pay. Payment is typically due by the Monday (settlement day) after a Thursday auction for T-Bills (or a few days after bond auction, as specified). Payment is made via your commercial bank – you'll get instructions to pay into a CBK account, quoting your CDS number and bid details. Some banks have integrated this so that if you have an account with them, you can just authorize a debit. Once you pay, the CBK issues the security and it appears in your CDS account on the value date.

6. Earning and Reinvesting

For T-Bills, you'll get the full face value back at maturity (automatically paid to your bank account or a CBK account that then sends to you). You can then reinvest in a new bill if you want. For T-Bonds, CBK will send interest payments to your bank every six months. A neat feature for active investors: if you have, say, a T-Bill maturing the same week you're bidding on a new one, you can combine (net off) the transactions – instruct CBK to take the maturity proceeds and automatically apply them to the new purchase, so you only pay or receive the difference. This is done by enabling a "netting" option in the portal – a convenience for those rolling over investments.

Secondary Market

If at any point you or your company needs to liquidate the investment before maturity, you can sell the security. T-Bonds are listed on the exchange (NSE) and can be sold through any broker; the prices will depend on market yields at that time (you might get a capital gain or loss). T-Bills aren't traded on the exchange, but CBK allows a procedure called rediscounting – essentially, CBK will buy back the bill at a rate 3% above the current market yield, which is a way to get out early (though 3% penalty in yield terms means you'll get a bit less). In practice, early exit is rarely needed for the short T-Bills, but it's good to know the option exists.

Benefits of Treasury Bonds & Bills for Fintech Companies and Professionals

For a fintech audience, government securities offer several compelling benefits:

Safe Haven for Idle Funds

Treasury bills and bonds are considered virtually risk-free in terms of default – the Kenyan government backs them, and it has a strong record of honoring domestic debt. This makes them an excellent place to park idle corporate cash or reserve funds. For example, a payments company that holds customer balances or a startup that has raised funds and is waiting to deploy them can earn interest in T-Bills in the interim. Rather than leaving money in a current account (which may pay near-zero interest) or a short fixed deposit, T-Bills provide a government-guaranteed return. As one Kenyan bank put it humorously, it's like entrusting your savings to your most reliable relative, "Uncle Government".

Attractive Returns (Especially in High-Rate Periods)

In recent years, T-Bills often offered better rates than many alternative low-risk investments. At one point in 2023–2024, 3-month bills were yielding more than money market funds and bank deposits. Even after the pullback, a ~9% risk-free return in early 2025 is still compelling. Longer T-Bonds frequently offer double-digit coupon rates. For fintech firms, this is a chance to enhance treasury income. It's no surprise that demand has been high – Kenya's T-Bills saw oversubscriptions with investors (including fintech treasuries) seeking these secure yields. By strategically laddering maturities (e.g., spreading investments across 3, 6, 12 month bills), a company can maintain liquidity while earning significant interest.

Regular Income Stream (Bonds)

For those that invest in bonds, the semi-annual interest payments can provide a steady income. This could benefit fintech startups looking for predictable cash flow to cover certain expenses. For instance, investing surplus capital in a 2-year bond at 12% will yield interest every six months that could be used to offset operating costs. Infrastructure bonds, in particular, are prized because their interest is tax-free – meaning if you get a 12% coupon, you keep the full amount, versus a normal bond where you'd net about 10.2% after 15% withholding. This tax advantage often makes the effective return higher than many taxable investments, a boon for corporate investors.

Diversification and Stability

Government securities can add stability to an investment portfolio that might otherwise be heavy in equities, startups, or other higher-risk ventures. For fintech founders and employees, holding some T-Bonds in their personal investment mix can offset the risk of their company stock or private business. For fintech firms that manage investment products or treasury, holding some government paper is a way to diversify risk. It's a counterbalance to the volatility that sectors like crypto, equities, or even real estate can have. In fact, many digital lending platforms or neo-banks globally use government bonds to store excess liquidity safely.

Use as Collateral

Banks in Kenya often accept Treasury bonds as collateral for loans, given their secure nature. A fintech company could potentially borrow against its bond holdings for short-term needs rather than sell them. Even regulators often allow government securities to count towards liquidity or capital requirements for financial institutions due to their safety. While this is more of a niche benefit, it underscores the high credit quality of these instruments.

Nation-Building Angle

Investing in Treasury bonds, especially infrastructure bonds, means your money is helping fund national development projects – roads, energy, technology infrastructure, etc. For mission-driven fintech leaders or those in the impact space, this can align with corporate social responsibility by supporting the country's growth while earning a return.

Risks and Considerations

No investment is without risks or downsides, and it's important for fintech professionals to understand these aspects of Treasury securities:

Interest Rate Risk

This is the big one for bonds. If you buy a long-term bond and later interest rates in the market rise, the value of your bond will fall if you try to sell it. For example, suppose you hold a 10-year bond with a 12% coupon, and two years later new 10-year bonds are paying 15%. Your bond would be less attractive unless sold at a discount. If you can hold to maturity, you still get your principal back, but on paper you might have an unrealized loss in between. T-Bills have minimal interest rate risk due to their short lifespan – they're usually held to maturity and just pay out, but even they can lose a bit of value if sold early in a higher-rate environment. The Kenyan market saw this in 2022–2023 when interest rates rose; anyone holding older bonds at 10-12% saw their market prices drop. The key mitigation is matching your investment duration to your needs – don't lock money in a 20-year bond if you might need it in 2 years.

Inflation Risk

If inflation skyrockets above your bond's interest rate, your real (inflation-adjusted) return is negative. Kenya's inflation has been variable, but generally if you're earning 10% and inflation is, say, 8%, your real return is 2%. This is still positive, but if inflation were to jump into double digits, it could erode the value of the fixed interest payments. Currently, yields have been high partly because inflation and policy rates were high, so investors were compensated. Going forward, if inflation falls faster than yields, these government securities could actually give very healthy real returns (which is positive for investors). Conversely, unexpected inflation spikes are a risk to monitor.

Reinvestment & Opportunity Cost

T-Bills return your money in a short time. If at that future point rates are lower, you might have to reinvest at a lower yield – that's reinvestment risk. Conversely, if rates are higher, it's great for new investments but any existing fixed-rate bonds are relatively less attractive. For fintech treasuries rolling over bills, a falling interest rate environment will gradually reduce the interest income as each new auction yields a bit less. There's also the opportunity cost that funds tied in even for 6 or 12 months can't be used elsewhere if suddenly a high-impact opportunity or need arises. However, the weekly auctions and secondary market provide flexibility to adjust fairly frequently if needed.

Liquidity for Large Sales

While an individual can sell a KES 100k bond easily, if a company builds a very large position and then needs to liquidate a huge amount quickly, the market might not absorb it without discounting the price. This is more a concern for big institutional players or if a fintech company had tens of billions in bonds (unlikely for now). Still, understanding that the secondary market has its own demand/supply is important. Infrastructure bonds, for instance, often stay in high demand (due to tax-free status, they even trade at a premium sometimes), so they can be easier to sell than a low-coupon long bond from years ago.

Default/Credit Risk

For domestic Kenyan government debt, this risk has historically been extremely low – Kenya has never outright defaulted on its shilling Treasury bills or bonds. The government can (and does) roll over debts and has the Central Bank as lender of last resort. That said, Kenya's public debt is elevated, and the debt management strategies (like reducing short-term T-Bills portion) indicate efforts to avoid stress. The primary concern would be if Kenya faced a severe fiscal crisis; it might restructure debt or in a worst case delay payments. This is a very unlikely scenario for domestic debt and would be a major event. Rating agencies still consider Kenyan government paper relatively safe. For practical purposes, local T-Bills and bonds are treated as risk-free by Kenyan banks and institutions (for example, banks don't have to put aside capital against them on their balance sheets).

Regulatory/Policy Changes

As seen with the recent proposal to shift issuance from CBK to the Treasury's PDMO, or the removal of certain tenors, the rules of the game can change. These changes might affect liquidity, how auctions are conducted, or the interest you can expect (e.g., if the Treasury tries to cap rates). Fintech companies should stay informed on policy announcements, as they could present new opportunities or constraints (for instance, a move to e-auctions only, or new platforms, etc.). The good news is these policies often aim to make the market more efficient and sustainable, which in the long run benefits investors as well.

In summary, the risks associated with Treasury bonds and bills are mostly about market conditions (rates, inflation) rather than the issuer's solvency. Proper planning – aligning investment duration with needs, diversifying across different maturities, and staying updated – can manage these risks effectively.

Leveraging Treasury Securities in Fintech and Corporate Strategy

Perhaps the most exciting aspect for the Fintech Association of Kenya audience is how Treasury bonds and bills can be strategically leveraged in business and innovation. Here are a few ways fintech professionals and companies are using or could use these instruments:

Corporate Treasury Management

Fintech startups and established companies alike often maintain cash reserves – for regulatory purposes, operational expenses, or just runway. Rather than leaving that money idle, companies are deploying it into T-Bills to earn interest until the funds are needed. For example, a payments company that accumulates transaction fees can periodically sweep excess cash into a 91-day bill, timed such that it matures before they'll need the liquidity. Some firms create an internal "ladder" – investing portions of cash in 1-month, 3-month, 6-month instruments so that something is always maturing (ensuring liquidity) while still boosting returns. Over a year, this can add a non-trivial amount of interest income to the balance sheet. It's a smart hedge against low bank deposit rates or volatile currencies. As an added note, if your company operates multi-country, Kenya's T-Bills at times have given much higher returns than dollar or euro deposits, albeit with FX risk if your functional currency isn't KES.

Integrating into Fintech Products

A number of fintech apps in Kenya focus on savings and investments. These apps can integrate Treasury bonds and bills as an investment option for users. For instance, a digital wallet or neo-bank might offer a "Save in T-Bills" feature, where user deposits get pooled and placed into T-Bills regularly, giving the user a higher yield than a normal savings account. This could be done in partnership with a licensed broker or through an API to the CBK (currently retail has to go through the portal manually, but one can envision fintech automation on top of it). Similarly, robo-advisors or wealthtech startups can include Kenyan government bonds in their portfolios for clients seeking low-risk assets. The familiarity and trust in government securities can actually help draw in conservative customers to fintech platforms. We already see Money Market Funds (MMFs) – some accessible via fintech – heavily invest in T-Bills and bonds, essentially passing the return to users minus a fee. A fintech could cut out the fund middleman and directly let users hold a piece of a Treasury bond (perhaps fractional ownership via a trust or SPV) – much like how some platforms allow buying fractions of stock.

Digital Lending and Securitization

Fintech lenders can utilize bonds as part of their capital management. For example, when loan demand is low, instead of letting cash sit, it can go into short-term T-Bills, and be quickly retrieved when needed for new loans. Additionally, holding some government bonds can strengthen the balance sheet, which might improve confidence among creditors or investors. We can also imagine future tokenization of government bonds – turning bond holdings into digital tokens that could be traded or used as collateral within blockchain-based finance ecosystems. Kenya's regulators haven't yet launched a sandbox for tokenized gov securities, but globally this is a growing trend, and Kenyan fintech innovators could be next in line.

Employee and Retail Education

Fintech companies often run financial literacy campaigns for their users. Treasury bonds and bills are perfect instruments to teach principles of saving and investing. Some people perceive government securities as complex or only for the wealthy; fintech platforms through blogs, webinars, or in-app education can change this narrative, highlighting how accessible and rewarding these tools can be. This aligns with the broader fintech goal of inclusive finance – for example, explaining that with KES 50,000 (or via certain programs even KES 3,000), one can become an investor in nation-building bonds, could encourage a culture of saving and investment among young professionals.

Competitive Advantage and Innovation

With CBK's push towards direct participation, there's room for fintechs to build services around this. Imagine a treasury auction aggregator that sends alerts and analyses to investors, or a feature that auto-bids in auctions at the best rates for you. A fintech startup could specialize in seamless group investing, where it pools many small investors to jointly bid on a bond (kind of a crowdfunding for a bond issue, which is essentially what M-Akiba did). By offering innovative user experiences on top of the government's infrastructure, fintechs can add value and even create new revenue streams (perhaps charging a tiny fee but still delivering net better returns to users than alternatives). Also, fintechs working with corporate clients can advise or facilitate those clients to use government securities for treasury management, deepening the fintech's role as a financial advisor/partner beyond just payments or software.

In essence, fintech companies can both use and enable usage of Treasury bonds and bills, amplifying their impact. Whether it's an internal finance strategy or an outward-facing product, integrating these stable instruments can enhance trust (users know their money is in a safe place) and improve financial outcomes (earning interest, compounding, etc.).

Conclusion: Merging Tradition with Technology

Kenya's Treasury bills and bonds may be traditional financial instruments, but in the current era they have found new life and relevance among the fintech community. Fintech CEOs and CFOs are using them to optimize returns on cash. Developers and product managers are thinking of creative ways to bring their benefits to a wider audience through apps and digital platforms. And through it all, the fundamental strengths remain: these are secure, reliable investments that can anchor a portfolio or treasury strategy.

With interest rates dynamic and the government embracing digital channels, now is the perfect time to take a fresh look at Treasury securities. They offer a bridge between Kenya's financial past and its digital future – blending the trust and stability of government backing with the efficiency and inclusivity of fintech innovation. For members of the Fintech Association of Kenya – whether you're in banking, payments, software development, or financial consulting – understanding and leveraging bonds and bills could be a savvy move that benefits both your balance sheet and your country's economic development.

Pro tip: Start small and learn by doing. Even if you're a seasoned fintech expert, try bidding on the next Treasury bill auction personally – experience the process via mobile. It could spark ideas for your business and give you firsthand insight into this evolving intersection of finance and technology. As Kenya continues to lead in fintech innovation, integrating time-tested tools like Treasury bonds and bills will ensure that innovation is built on a foundation of stability and sound financial management. Happy investing!