04
Fixed Income Securities
Fixed income securities are debt instruments issued by Governments, Corporate businesses, etc., The term
fixed income broadly refers to an investment in which the borrower or the issuer of the debt instrument is
expected to make periodic payment(s) of fixed sums to the investor which could include the principal and/ or
interest over a period of time. These securities come in the form of different types of debt instruments that are
typically known as Bond, Bills, Commercial papers with other possible variations.
Debt instruments issued by National Governments are in the form of Treasury bills, usually with maturities of
less than 1 year and Bonds with maturities over 1 year upto 30 years. In the case of Treasury bills, there is
no periodic interest payment. The difference between the price paid today and the maturity value equates to
interest for the tenor of the Treasury Bill. On the other hand, Bonds offer periodic interest payment usually at
intervals of 6 months until and including the final maturity date.
In Kenya, fixed income securities available for investment are predominantly Government Treasury Bills and
Treasury Bonds. The Central Bank, acting in the capacity of agent for the Government of Kenya issues
treasury bills every week for maturities of 91, 182 and 364 days. They also issue Bonds for different maturities
every month. Treasury Bills and Treasury Bonds are also traded in the secondary market (traded by institutions
other than CBK), providing investors with an ‘exit’ route should they wish to realise the value of investment for
any particular reason.
Fixed Income investment is generally considered to be less risky compared to Equity investment. Investors
must make careful investment decisions based on their individual investment requirements or expectations
over the time period.
Thinking of where and how you should invest this year?
Perhaps you should consider Treasury Bills or Eurobonds.
Contact your GTBank Relationship Manager today
for this and more on investment
opportunities.
4 April 2018