The Central Bank of Kenya, in its capacity as fiscal agent for the Republic of Kenya is offering you an opportunity to invest in your future. The CBK recently (9th May 2012) began the sale of a new 5-year fixed coupon (fixed payment) bond intended for budgetary support purposes.
The bond is currently on sale and will remain on sale until the 22nd of May 2012. The minimum amount one can invest in the bond is KES 50,000 (this is nothing new; the minimum amount one can invest in a bond in Kenya is KES 50,000) and payments up to and below KES 1 million must be made by cash, banker’s cheque or RTGS and must reach the CBK by 2pm (for cash and cheques) and by 3:30pm (for the RTGS) on the 28th of May 2012. Amounts exceeding KES 1 million must be made by RTGS.
The first coupon payment will be paid on the 26th of November 2012, with payments coming in every six months after that date. The last payment will include your initial investment and the final coupon and will be made on the 22nd of May 2017.
No withholding withholding tax
Remember, interest earned on your bond is subject to a withholding tax of 15% and as a last resort, the CBK will reserve the right to adjust the interest upwards at 3% above the higher of the market yield at the time or the coupon rate on the bond. This is called rediscounting and it means that should the investor want to sell the bond within the 5-year period and is unable to do so through the secondary market, the CBK would pay the investor 3% above the higher of the prevailing market yield or the coupon rate as the price of the bond. This amount would be lower than the initial price of the bond that the investor paid, the logic being that the investor may have received coupons (the periodic payments that the investor receives).
If you have a loose KES 50,000 and you are interested in making some “risk-free” money, buy the bond. Taking a look at the interest rates on bonds of late, one stands to make some money over the course of the bond. It is definitely worth considering.