Investors who are investing in Treasury Bills (T-Bills) have watched helplessly as returns on T-Bills fall. Currently, updates from the Central Bank of Kenya show that the 91-day T-Bill’s rate stands at 10.0311 per cent. This is a sharp fall from the rate of 15.7 per cent that was recorded as at October 3, 2024.
The 182-Day T-Bill currently has a return of 10.0015 per cent while the 364-Day T-Bill has a return of 11.7572 per cent. According to the presidential economic advisor David Ndii, the 91-day T-Bill rate is on course for single digit returns as soon as next week.
In October 2023, the 182-Day T-Bill had a return of 16.6 per cent while the 364-Day T-Bill had a return of 16.8 per cent.
The actual returns from making investments in T-Bills will be much lower given that returns on T-Bills are usually subjected to a 5 per cent withholding tax.
“Treasury bills are a secure, short-term investment, offering you returns after a relatively short commitment of funds,” the CBK states.
“Treasury bills are sold at a discount. This means that investors choose the amount that they will receive when the bill matures, or the face value of the bill, and pay less than that amount when purchasing it.”
The fall in rates comes in the wake of falling lending rates. Earlier this month, the CBK lowered its lending rate from 12 per cent to 11.25 per cent.
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In lowering the rate, the Monetary Policy Committee (MPC) stated that generally, global inflation has declined and central banks in the major economies are expected to gradually continue lowering interest rates.
“Kenya’s overall inflation remained broadly unchanged at 2.8 per cent in November 2024 compared to 2.7 per cent in October, thereby remaining well below the midpoint of the target range of 5±2.5 per cent,” the committee that was chaired by CBK Governor Kamau Thugge stated.
Between December 2023 and December 2024, the CBK lending rate has fallen from 12.50 per cent to the current 11.25 per cent, reflecting a drop of 0.75 points.
