Coupon income and net yield on a Treasury bond.
Net coupon a year
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Gross coupon a year
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Net yield
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Lifetime net income
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Coupons, not discounts
A Treasury bond pays you to wait. Unlike a bill, which you buy cheap and redeem at face value, a bond pays a fixed coupon on its face value at regular intervals, usually twice a year, and returns the face value when it matures. If you hold a KES 1 million bond with a 13 percent coupon, the government pays you 13 percent of that face value every year for the life of the bond, typically split into two half-yearly payments, and hands back the KES 1 million at the end. This calculator focuses on that coupon stream: what it pays gross, what tax takes, what you net each year, and what the whole stream adds up to over the term.
Bonds suit a different goal from bills. Where a bill is a short safe parking spot, a bond locks in a known income for years, which makes it useful for someone who wants predictable cash flow, a retiree drawing income, or an investor laddering maturities. The trade is flexibility: your money is committed for longer, and while you can sell early, the price you get then depends on where rates have moved.
Running yield versus what you paid
The yield figure this calculator shows is the net coupon divided by your purchase price, which is the running yield, sometimes called the current yield. It answers a specific question: for every shilling you put in, how much net income lands each year. It is not the yield to maturity, which would also fold in any gain or loss between your purchase price and the face value you collect at the end, plus the timing of every payment. Running yield is the right lens for income planning and the honest label for what this tool computes. If you bought at a discount to face value, your true yield to maturity would be a little higher than the running yield, and if you paid a premium it would be a little lower.
Tax shapes the net yield directly. The withholding rate on the coupon is the one this calculator applies, and you can choose it: 15 percent for most bonds as modelled here, 10 percent on some long-dated issues, or 0 percent for infrastructure bonds, whose coupons are treated as tax-exempt. That exemption is a genuine draw and is covered below. Confirm the applicable rate with the Kenya Revenue Authority, because the treatment of different bond classes has shifted over time.
A 13 percent bond over ten years
Take a KES 1 million bond with a 13 percent coupon, bought at par for KES 1 million, with ten years to run and the standard 15 percent withholding applied. The gross coupon is KES 130,000 a year. Withholding tax takes 15 percent, KES 19,500, leaving a net coupon of KES 110,500. Against the KES 1 million you paid, that is a net running yield of 11.05 percent, and across ten years the net coupons total KES 1,105,000. The figures below use the rates this calculator applies.
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The chart stacks the net coupon against the tax slice each year, and shows the net income accumulating across the ten-year term to its lifetime total.
The infrastructure-bond exemption
The standout feature of the Kenyan bond market for ordinary investors is the infrastructure bond. Its coupons are treated as tax-exempt, so setting the withholding rate to 0 percent in this tool reflects that the full coupon reaches you untouched. For a higher-rate taxpayer this can make an infrastructure bond's net return noticeably better than a standard bond paying a similar coupon, because there is no withholding skimming the income. The usual caveats apply: the exemption attaches to qualifying issues, and tax treatment has been revisited before, so confirm an individual bond's status with the KRA first. A practical tip is to compare bonds on their net coupon rather than the headline rate, since a 13 percent taxable coupon and a lower tax-free coupon can land closer together than they first appear.
Reader questions
Why does the calculator ask for both face value and purchase price?
Because the coupon is paid on the face value, but your yield depends on what you actually paid. Bonds often trade above or below face value in the secondary market, so a bond bought for less than its face value yields more than its coupon rate suggests, and one bought at a premium yields less. Entering both lets the tool show the running yield on your real outlay rather than on the round face number.
Is the lifetime figure the total profit?
Not quite. The lifetime figure is the sum of net coupons over the term. It does not add the return of your face value at maturity, nor subtract any premium you paid above face. Treat it as total net coupon income, the income-planning number, not a full profit-and-loss on the investment.
Can the coupon rate change during the bond's life?
For a standard fixed-coupon Treasury bond, no. The coupon is set when the bond is issued and stays the same to maturity, which is exactly what makes the income predictable. Floating-rate or special issues behave differently, but the typical fixed-coupon bond this calculator models pays the same coupon throughout.