Folks,corruption / mistake or my error,something is quite amiss with the Central Bank of Kenya Treasury Bills/bonds rates quoted to the public. I want to know if anyone has noticed what I just found out when I bought 182 days bill supposedly yielding quoted 8.121% pa...1M bill cost me 966,918.00 and after six months,I get 1M. My calculations shows that the yield was actually 6.842%,it cannot be the 15% taxes because the yield will still be (6.842+ (6.842 x 0.15))= 7.8683% the formula CBK gives formulae for calculating TB as -
Where,
P = Price per Ksh 100 which investor will pay
r = Interest Rate or yield per annum quoted by the investor
d = Days to maturity of Tenor (91,182 and 364 days)
But,not to be intimidated by the formula,you could simply use standard four methods to calculate yield as follows- ((MoneyYouWillGetAfter182Days minus WhatYouPaidTreasury(the check)) divided by WhatYouPaidTreasury) times 100
and to see what the yield is per year multiply by two,because 182 days equals Six months.
In my case-
(((1,000,000.00 - 966,918.00)/966,918.00) x100)=3.421 (annualized to about 6.841%,which is -1.28% of what Central Bank of Kenya says it yields.
CBK gives an online calculator,which theoretically yields -
((1,000,000.00 -961,080.00)/961,080.00) x 100 x 2 = 8.099%,still NOT the 8.121% quoted. BUT the amount I paid (my check) was NOT 961,080.00 per Online calculator,but 966,918.00 (paid 5,838 more for the 1M yielding Treasury) ... yet another discrepancy.
What are the other costs involved in the Treasury Transaction?
What could have gone wrong for CBK to announce Treasury Bills yielding 8.121 for 182 days,but,when a client bids at the Treasury auctions and succeeds,the yield turns out to be a mere 6.841% and not the 8.121% as they say the yield is?
If corruption/error,this is a very serious matter hidden in a very subtle difference which many investors will never notice,I wonder what actually went wrong if the case and especially with such a critical tool for the Treasury in raising short term funds to meet current budget.