The National Treasury is planning to issue a 10-year bond to raise Sh25 billion for the purposes of financing the country's Budget.
Investors in the bond will be paid an interest rate (technically called coupon rate) that will be determined by the market through an auction. The coupon will be paid half-yearly.
The bond has been advertised by the Central Bank of Kenya (CBK) acting as the agent for the Treasury.
“The Central Bank of Kenya, acting in its capacity as fiscal agent for the Republic of Kenya, invites bids for the [Sh25 billion, 10-year] bond; purpose [is] budgetary support,” said the CBK in the advert Thursday.
A withholding tax of 10 per cent is imposed on the bond’s interest income.
This means that if an investor earns Sh100,000 as gross income from their investment in the bond, the CBK automatically withholds Sh10,000 which is paid to the taxman while the investor only receives Sh90,000 net, over and above the principal.