Treasury Bonds vs Unit Trusts in Kenya: Which Pays?

Updated 29 October 2026

Updated October 2026. Treasury bonds vs unit trusts in Kenya: a Treasury bond lends money directly to the Government of Kenya for years at a fixed coupon, while a unit trust pools your money with other investors under a CMA-licensed manager who picks the assets for you. Bonds give a known income if you hold to maturity; unit trusts give flexibility and smaller entry amounts but no fixed return. Here is how to choose.

Treasury bonds vs unit trusts at a glance

How Treasury bonds work

CBK sells bonds on behalf of the National Treasury through monthly auctions. You open a DhowCSD account, bid for a bond in the auction, and receive coupon interest every six months until the bond matures, when you get your principal back. The coupon is fixed, so if you hold to maturity you know your income in advance. That certainty is the main reason savers pick bonds over unit trusts. Read our step-by-step guide to buying through DhowCSD (the same platform handles bonds), and see the latest reopening in CBK reopens KSh50bn Treasury bonds.

The risk is price movement before maturity. If interest rates rise, older bonds with lower coupons are worth less on the secondary market, so selling early can mean a loss.

How unit trusts work

A unit trust collects money from many investors and buys a portfolio. At 30 June 2026, 320 funds in 66 schemes held about KSh 948.7 billion. Money market funds hold short-term paper; fixed income funds hold bonds, so a bond fund is one way to get bond returns with a smaller amount and a professional picking the bonds. You pay a management fee for that, and the return isn’t fixed. See all CMA-approved money market funds.

Worked comparison: KSh 500,000 for five years

Illustration only, using figures quoted above. A bond with a 12.5% coupon pays KSh 62,500 a year before tax; after 10% withholding tax you keep about KSh 56,250 a year, as long as you hold it and the price you paid was at par. A unit trust earning 10.3% a year would grow by about KSh 51,500 in the first year before 15% tax, but that yield can rise or fall during the five years. If you buy a bond above or below par, your real yield changes, so check the CBK auction results.

Which should you choose?

• You want a known income and can lock money away: Treasury or infrastructure bonds.
• You may need the money at short notice: a money market unit trust.
• You have a small amount or don’t want to manage auctions: a unit trust (fixed income fund).
• You want both: many investors keep an MMF for liquidity and buy bonds with lump sums. Compare short-term paper in Treasury bills vs bonds and track rates on our rates tracker.

Official sources: Central Bank of Kenya (auction notices and results), Capital Markets Authority, KDIC.

Frequently asked questions

Are Treasury bonds better than unit trusts in Kenya?

Treasury bonds pay a fixed coupon and suit money you can lock away; unit trusts are more flexible but their returns are not fixed. Neither is insured by KDIC.

Are Treasury bond returns taxed in Kenya?

Interest on most Treasury bonds faces 10% withholding tax; infrastructure bonds are tax-free. Check the CBK prospectus for each bond.

Can I sell a Treasury bond before maturity?

Yes, on the NSE secondary market, but the price may be higher or lower than what you paid.

Is a bond unit trust the same as buying a bond?

No. A fixed income fund holds many bonds and charges a fee; its return varies. Buying a bond directly gives you its fixed coupon.