How to Build a Monthly Passive Income from Kenyan Treasury bonds

Karatasi · Investing · 12 May 2026

Most Kenyans who try to build passive income hit the same wall. The instruments that pay well don't pay monthly, and the ones that pay monthly don't pay well. Bond laddering is a quiet, methodical way around that wall, and right now the numbers are unusually friendly.

The income problem nobody talks about

If you've ever tried to engineer steady monthly income from your savings, you've probably noticed something frustrating. Bank fixed deposits credit interest at the end of the term. Money market funds reinvest automatically. Dividend stocks pay quarterly at best, and not on the schedule you'd choose. Treasury bonds, the safest and often highest yielding option available to a Kenyan retail investor, pay twice a year.

That last one is the crux of the problem. A Kenyan Treasury bond at a 13% coupon will pay you about 6.5% of face value, twice. Two cheques a year is not a salary. So most people give up on the idea of bonds as an income engine and settle for less.

They shouldn't. With a small spreadsheet and a little planning, the same Treasury bonds that pay twice a year can be arranged to pay you every month. That's exactly what our Karatasi Bond Laddering Template is built to help you do.

The simple idea behind a bond ladder

A ladder solves the twice a year problem with arithmetic. Instead of buying one bond, you buy six. Each one is chosen so its coupon months fall in a different pair of months on the calendar. One bond pays in January and July. The next in February and August. And so on through June and December. Stacked together, those six bonds drop a coupon into your account every single month of the year.

That's it. No clever instruments, no leverage, no derivatives. Just six government bonds bought at the right auctions.

The numbers right now make this interesting

The May 2026 CBK auction is a useful snapshot of what's currently on offer. The Central Bank reopened three fixed coupon bonds: FXD1/2012/020 with a 12.000% coupon and 6.6 years to maturity, FXD1/2019/020 with a 12.873% coupon and 13 years remaining, and FXD1/2021/025 with a 13.924% coupon and 20.1 years to maturity. All three attract a 10% withholding tax.

To put those rates in context, 91-day Treasury bills were averaging about 8.51% in the same week, with 182-day bills at 8.19% and 364-day bills at 8.21%. So a long tenor bond at 13.924% before tax, or 12.53% after the 10% withholding, pays you roughly four percentage points more than a one year T-bill, every year, for two decades.

And if you're willing to look at Infrastructure Bonds, a special class of T-bond used to fund roads, energy and water projects, the maths gets better. Infrastructure bonds are tax exempt. The stated coupon is your actual return, with no withholding tax deducted. Recent IFB issues have carried coupons in the 11% to 14.5% range, which means on an after tax basis they can comfortably beat an equivalent FXD. The Karatasi template recognises both bond types and adjusts the tax calculation automatically, so you can see at a glance how much more net income a tax exempt rung adds to your monthly total.

A worked example

Imagine you've saved KES 1,200,000 and you'd like roughly KES 12,000 of net income every month. Here's one way to set up the ladder.

• Six bonds, each KES 200,000 face value
• Assume an average coupon of 13% across the six
• Choose them so the coupon months stagger across all twelve calendar months

Each bond pays about KES 13,000 gross every six months. After 10% withholding tax on bonds with ten or more years to maturity, that's KES 11,700 net per bond, per payment. Since each bond pays twice a year, six bonds spaced across six month pairs deliver one payment per month, every month. About KES 11,700 hitting your account on a schedule you can plan around.

That's a sensible answer to the question "how do I build a salary from KES 1.2M?", particularly compared to a savings account at 4 to 6%, or a money market fund at 8 to 9%. You don't have to do this maths by hand. The Karatasi Bond Laddering Template does it for you, with a feasibility check that tells you whether your target is realistic before you commit any capital.

The hard parts, honestly

Bond laddering isn't magic, and we're not in the business of pretending otherwise. A few things to know before you start.

• Your capital is locked up. A 10 year bond is a 10 year commitment. You can sell early on the NSE secondary market, but the price you get depends on where interest rates have moved.
• Yields move. The coupons available today won't be the same coupons available in six months. That's why the ladder works. When one rung matures, you reinvest at whatever rates are then on offer.
• Auctions don't always fill at the indicative rate. CBK reserves the right to accept bids in full or part, or to reject them entirely. Competitive bidders sometimes miss out.
• Tax rules can change. The 10% and 15% withholding regime and the IFB exemption are policy, not physics.
• The minimum is real. Treasury bonds are sold in multiples of KES 50,000. A six rung ladder needs at least KES 300,000 to be meaningful. For some Infrastructure Bonds the minimum can be KES 100,000.

Building the ladder, in practice

You can do this with a notebook and patience. But the planning gets fiddly fast. Calculating semi annual gross versus net coupon, tracking which months are covered, comparing what you planned with what you actually bought at auction. That's why we built the Karatasi Bond Laddering Template.

It walks you through four steps.

1. Set your goals. Enter your capital and target monthly income. The template tells you whether the target is realistic given typical Kenyan bond yields.
2. Understand your choices. A plain language guide to FXD versus IFB, tenor, and withholding tax.
3. Build the ladder. Distribute your capital across six rungs. The model handles tax automatically, rounds face values to KES 50,000 increments, and shows the projected monthly cash flow as a calendar and a chart.
4. Track what you buy. Log each bond as you buy it at the CBK auction. A summary dashboard compares your plan with your actual portfolio, month by month.

It's a single Excel file. You download it once, use it forever, and your data stays on your computer. No subscription, no account.

Why we think this matters now

For most of the last decade, Kenyan investors have been told that "passive income" means a Sacco dividend, a rental property, or a side hustle disguised as an investment. T-bonds were treated as something institutional, a thing pension funds and banks did, not a thing a salaried Kenyan with KES 500,000 in savings could approach.

That framing is increasingly out of date. DhowCSD lets individuals and corporates invest in government securities directly, without going through an intermediary. Auctions run almost monthly. Coupons on long dated paper sit comfortably above what most other safe instruments offer. The infrastructure is there. The pricing is there. What's been missing is a clear, calm way to plan the thing without needing a finance degree.

A ladder is calm. It doesn't ask you to time the market or predict where rates are going. It asks you to spread your money sensibly, write down what you bought, and let the coupon payments arrive.

Twelve times a year.

Ready to map your own ladder? Get the Karatasi Bond Laddering Template here. Set it up in about ten minutes. One file. Step by step guidance. Automatic tax. Charts for cash flow and maturity.

This article is for informational purposes only. Bond yields, tax rates and auction terms change. Always read the current CBK prospectus before bidding, and consider speaking to a financial adviser about how bonds fit your broader plan. The projections discussed here are informed estimates, not guarantees.