Sharp Daily
No Result
View All Result
Friday, August 8, 2025
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
Sharp Daily
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team
No Result
View All Result
Sharp Daily
No Result
View All Result
Home Investments

Investing in government bonds pros and cons

Fridah Karei by Fridah Karei
December 11, 2024
in Investments
Reading Time: 2 mins read

Investing in government bonds in Kenya provides both advantages and disadvantages, based on official data from the Central Bank of Kenya (CBK) and the Nairobi Securities Exchange (NSE).  One key advantage of government bonds is their low risk.

These bonds are backed by the government, offering a high level of security compared to other investment options like stocks. With a very low chance of default, Treasury bonds are considered one of the safest forms of investment in Kenya.

Additionally, most government bonds offer regular income through semi-annual interest payments, making them an appealing option for investors seeking predictable returns. The flexibility of bond durations, which range from two to thirty years, also allows investors to align their investment horizon with their financial goals, whether it’s saving for retirement or funding education.

Moreover, the availability of tax-exempt infrastructure bond provides an additional incentive for investors, as these bonds are exempt from withholding tax, thus increasing the effective return. Government bonds in Kenya are auctioned monthly, ensuring frequent investment opportunities and a well-established secondary market through the NSE, enabling investors to buy and sell bonds before they mature. However, there are some drawbacks to consider.

RELATEDPOSTS

A beginner’s guide to investing in Kenyan government bonds

February 12, 2025

Additionally, government bonds provide a predictable income stream through regular interest payments, which can be attractive for those seeking reliable cash flow. In some cases, the interest earned from government bonds may be tax-exempt, further enhancing their appeal.

Bonds also serve as an effective tool for portfolio diversification, helping to reduce risk exposure, particularly during times of market volatility. Government bonds are often viewed as a safe haven during economic downturns, as investors tend to flock to them in times of uncertainty.

Another significant advantage is the lower risk of default. Governments, especially those in developed countries, are less likely to default on their debt, making these bonds highly reliable. Furthermore, many government bonds are highly liquid, allowing investors to easily buy or sell them without affecting the market price significantly.

First, the capital requirement for government bonds may be a barrier for small investors, as the minimum investment for fixed-coupon bonds is KES. 50,000, while infrastructure bonds require at least KES. 100,000 Furthermore, although Treasury bonds are generally secure, they are not capital protected. If an investor sells a bond on the secondary market before maturity, there is a risk that the bond’s price could be lower than the initial purchase price, leading to a potential loss. Additionally, long-term investors may face the challenge of commitment when holding bonds with maturities that stretch up to 30 years.

Previous Post

Recognizing the warning signs in menstrual health

Next Post

Government proposes new fund to combat youth unemployment

Fridah Karei

Fridah Karei

Related Posts

Analysis

The hidden cost of outdated economic statistics

August 7, 2025
1049795356
Analysis

Maximizing Your Pension Contributions

August 1, 2025
Analysis

Kenya’s Interest Rate Cut: A Turning Point for Growth

July 31, 2025
Analysis

Transferring Your Retirement Benefits Between Pension Schemes in Kenya

July 23, 2025
Investments

Invest in stability: introducing the Cytonn USD money market fund

July 18, 2025
Analysis

Park your money where it grows: Why more Kenyans are turning to Cytonn Money Market Fund

July 16, 2025

LATEST STORIES

Segregated Pension Schemes in Kenya Q2’2025 Performance

August 8, 2025
Asset allocation dividing an investment portfolio among different asset categories.

Building a Retirement Portfolio in Kenya

August 8, 2025

Steps banks can take to align with fair lending practices

August 7, 2025

The hidden cost of outdated economic statistics

August 7, 2025

EABL posts 12.2% profit surge, strengthens regional footprint despite rising illicit trade

August 1, 2025
1049795356

Maximizing Your Pension Contributions

August 1, 2025

The functional role of narrative in financial markets

August 1, 2025

Tanzania’s protectionist shift and what it means for Kenyan entrepreneurs and regional trade

July 31, 2025
  • About Us
  • Meet The Team
  • Careers
  • Privacy Policy
  • Terms and Conditions
Email us: editor@thesharpdaily.com

Sharp Daily © 2024

No Result
View All Result
  • Home
  • News
    • Politics
  • Business
    • Banking
  • Investments
  • Technology
  • Startups
  • Real Estate
  • Features
  • Appointments
  • About Us
    • Meet The Team

Sharp Daily © 2024