Government bonds and Treasury bills are both government securities issued through the Bank of Zambia - same issuer, same safety guarantee. The difference is in how they work and what they suit. Understanding these differences helps you choose the right instrument for your investment goals.
Use our Government Bonds calculator and Treasury Bills calculator to model returns on both instruments.
The key differences at a glance
Feature | Government Bonds | Treasury Bills |
|---|---|---|
Type | Long-term debt | Short-term debt |
Tenor | 2 to 15 years | 91 to 364 days |
How you earn | Semi-annual coupon payments | Discount (buy below face value) |
Issuance | At par (face value) | At discount |
Minimum (non-competitive) | K1,000 | K1,000 |
Minimum (competitive) | K500,000 | K500,000 |
Auction frequency | Twice per quarter | Every two weeks |
Early exit | Secondary market only | Rediscount at BoZ (min K50,000) or secondary market |
Withholding tax | 20% on coupon income | 20% on discount income |
Handling fee | 1% per coupon | 1% at maturity |
How Treasury bills work
With Treasury bills, you buy at a discount - you pay less than the face value. At maturity, you receive the full face value. Your profit is the difference between what you paid and the face value. There are no periodic payments - everything is settled in one lump sum at the end.
The pricing formula:
Price = Face Value / (1 + (Days / 365 x Yield Rate))Example: 182-day T-bill at 11.9% yield, face value K100:
Price = K100 / (1 + (182/365 x 0.119)) = K100 / 1.05932 = K94.40Your gross profit: K100 - K94.40 = K5.60 per K100 face value (before tax and fees).
How government bonds work
With bonds, you buy at par - the face value equals what you pay. Every six months you receive a coupon payment based on the fixed coupon rate. At maturity you get your face value back.
Example: K100,000 at 15.80% for 7 years produces 14 net coupon payments of K6,223.91 each, plus K100,000 returned at maturity. Total return: K187,134.74.
Worked comparison - K100,000 invested
Treasury bill: K100,000 face value, 364 days at 13%
Cost (what you pay): K100,000 / (1 + (364/365 x 0.13)) = K88,525.70
Gross discount (profit): K11,474.30
Withholding tax (20%): K2,294.86
Handling fee (1%): K114.74
Net profit: K9,064.70
Annualised net return: 10.24%
Government bond: K100,000 face value, 2 years at 14.25%
Cost (what you pay): K100,000 (par issuance)
Gross coupon per payment: K7,105.48
Net coupon per payment: K5,613.33
Total net interest over 2 years (4 payments): K22,453.32
Annualised net return: 11.23%
Investment | Duration | Net Profit | Annualised Net Return |
|---|---|---|---|
T-bill (364 days, 13%) | 1 year | K9,064.70 | 10.24% |
Bond (2-year, 14.25%) | 2 years | K22,453.32 | 11.23% |
When Treasury bills make more sense
Short-term cash parking for 3 to 12 months
You need access to your money sooner
Testing the waters before committing to bonds
Lower opportunity cost if interest rates are changing
You prefer a single lump-sum return rather than periodic payments
When government bonds make more sense
Long-term predictable income stream
Higher yields than Treasury bills
You want regular semi-annual cash flow (coupon payments)
Willing to lock in for 2 or more years
You can use bonds as collateral for bank loans
Both are safe
Both backed by the Zambian government - considered default-free for domestic investors
Both fully dematerialised (paperless, stored in CSD)
Both available to anyone - individuals, businesses, foreign entities
Same registration process: CSD account plus a Kwacha bank account
You do not need to choose one or the other. Many investors hold both - T-bills for short-term liquidity and bonds for long-term income.
Learn more about each instrument in our detailed guides: How to Invest in Government Bonds in Zambia and How to Invest in Treasury Bills in Zambia.