Government Debt Securities Management as of December 9, 2013 - PDF document

Ministry of Finance of the Republic of Indonesia Government Debt Securities Management as of December 9, 2013 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia

2 Government Securities Management and Crisis Management Protocol & Bond Government Debt Securities Market Performance & Statistics Stabilization Framework Financing Strategy Outline 1. 2. 3.

3 Government Securities Management and Financing Strategy

General Strategy for Debt Financing 2014 1. Prioritizing the issuance of domestic government securities to support market development and risk management of debt portfolio 2. Issuing global bonds as complementary; Strategi Umum Pengelolaan SUN 2013 3. Determining debt instrument by taken into account of market need and investor base expansion need; 4. Issuing Retail Bond for market deepening and financial inclusion; 5. Performing active portfolio management Government securities through, among others, debt buybacks and switches, including liability management for foreign currency Government Securities; 6. Expanding the scope of Bond Stabilization Framework and enhancing the market indicators of Crisis Management Protocol (CMP) Government Securities in order to support the market stability; 7. Maintaining a negative net flow policy for foreign loans; 8. Strengthen the function of Investor Relations Unit, among others, through the proactive dissemination of information, rapid and effective responses, and effective communication with investors and other stakeholders. 4

Government Securities Market Development Framework Deep & Liquid Market Sufficient Market Absorption & Efficient Price/Yield MARKET INFRASTRUCTURE Primary Market Demand Activities: • • Banks Regular Issuance (Book building, Issuance, Private Placement) • Foreigners Infrastructure: • • Insurance Supply Auction System for onshore USD issuance: Company - Debt Switch Program (Many to Many) • Government • Mutual Fund - Electronic Trading Platform (ETP) for Retail Govt. securities • Central Bank Debt - Hittable of PDs quotation • Pension Funds Securities • Securities • SUKUK Company Secondary Market • Retail Investor • Domestic Activities: • Potential Buyback, Debt switch, Securities Lending Investors Infrastructure: • Buyback System, Primary Dealers, Selling Agent, Repo, Benchmark Yield Curve , Brokers/Dealers, Price Discovery Mechanism (IBPA, Reporting System) Regulation and Supervision 5

Financing Trend, 2004 – 2014 (trillion IDR) 200 2,5 2,4 2,0 150 1,8 1,7 1,6 1,5 100 1,3 1,1 1,1 1,0 0,9 50 0,7 0,5 0,5 0 0,1 - -50 (0,5) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014** Govt Securities - net 6,9 22,6 36,0 57,2 85,9 99,5 91,1 119,9 159,7 231,8 205,1 Domestic Loan - - - - - 0,4 0,6 0,8 0,5 1,0 External Loan - net (28,1) (10,3) (26,6) (26,6) (18,4) (12,4) (4,6) (17,8) (23,5) (16,9) (20,9) Others/Non-Debt - net 42,0 (1,2) 20,0 9,1 16,6 25,5 4,6 28,3 38,1 8,8 (9,8) Budget Defisit, % to GDP 1,1 0,5 0,9 1,3 0,1 1,6 0,7 1,1 1,8 2,4 1,7 Notes: * Revised Budget 2013 ** Budget 2014 6

Securities Financing Realization 2013 (Million IDR) % Realization Revised Realization to Revised Budget 2013 (ao December 6, 2013) Budget 2013 Government Securities Maturing in 2013 96.980.835 85.394.084 88,05% Government Securities Net 224.702.157 235.780.361 104,93% Buyback 1.551.385 1.551.385 100,00% Issuance Need 2013 * 323.234.377 323.171.187 )* 99,98% Government Debt Securities (GDS) 269.549.955 Domestic GDS 228.055.255 - Coupon GDS (Auction, Private Placement) 165.450.000 - Conventional T-Bills (Auction, Private Placement) 42.400.000 - Retail Bonds 20.205.255 International Bonds 41.494.700 - USD Global Bonds 39.228.000 - USD Domestic Bonds 2.266.700 Government Islamic Debt Securities 53.175.875 Domestic Government Islamic Debt Securities 35.937.875 Global Sukuk 17.238.000 )* Including Accrued Interest Neto amounted IDR445,357 billion - Govt. Securities Net amounted IDR224.7 trillion already moved to loan program 7

2014 Budget Financing [in IDR billion] Budget % to GDP A. Total Revenue 1.667.140,8 16,07% - 0,00% B. Total Expenditure 1.842.495,3 17,76% C. Primary Balance (54.069,0) -0,52% D. Deficit (175.354,5) -1,69% E. Financing 175.354,5 1,69% I. Non Debt Financing (9.773,7) -0,09% II. Debt Financing 185.128,2 1,78% 1. Government Securities (Net) 205.068,8 1,98% 2. Foreign Loan (Net) (20.903,6) -0,20% + Disbursement 39.132,7 0,38% - Program Loan 3.900,0 0,04% - Project Loan 35.232,7 0,34% + Subsidiary Loan Agreement (SLA) (1.226,3) -0,01% + Repayment (58.810,0) -0,57% 3. Domestic Loan (Net) 963,0 0,01% Assumptions : a. GDP (trillion IDR) (Y.o.Y) 10.376.006,3 b. Growth (%) 6,0 c. Inflation (%) y-o-y 5,5 d. 3-month-SPN (%) 5,5 e. IDR/USD (average) 10.500 8

Government Securities Financing Gross (2014) Indicative DOMESTIC: Description Uraian  Auction: Target  23 times of conventional securities auction  20 times of islamic securities auction Govt Securities (neto) 205,069  Non-Auction  Retail bonds, consist of ORI, Saving Bond Redemption 135,893 and Sukuk Retail.  Private Placement (SDHI) Cash Management 14,000 Buyback 3,000 INTERNATIONAL BOND  Issuance of International Bonds as Govt Securities (gross) 357,962 complement to avoid crowding out in domestic market and provide benchmark for corporate Domestic 80.5% issuance, consist of USD, YEN or EURO global bonds Auction 69.4%  Maximum issuance international bond 20% from target gross Retail (Convensional/Islamic) 10.5% Private Placement/Non Tradable 0.6% Issuing the Government Securities using Front Loading Strategy in the first semester Foreign 19.5% 9

Government Debt Securities Operation Plan (2014) Issuing in domestic market will be prioritized Issuing in variety of tenor Issuing in international market with variety of currency and tenor Buyback/direct transaction, debt switch New initiatives: • saving bonds issuance • euro denominated global bond issuance under GMTN 1. Issuance: • unguaranteed Samurai bonds issuance • debt switch many to many 2. Government Securities Liquidity • staple bonds • global bond liability management Enhancement: • reopening SPN 10

11 • Debt switch (many to many & staple bonds) Portfolio Management Transaction Government Debt Securities Transaction Plan • Global bonds issuance (USD, Euro) • Samurai bonds issuance (Yen) • Liabilities management (USD) • Buyback/direct transaction International Bond Issuance • Conventional retail (ORI) • Onshore USD issuance Retail Bond Issuance Domestic Auction • Saving bonds • IDR issuance (2014)

Government Securities Performance

Primary Market Performance [IDRTrillion] 60 500 15 13,97 435,04 430,59 50 11,92 11,86 52 393,41 400 12 50 48 10,42 10,14 45 10,04 10,01 40 315,91 39 300 9 38 8,49 30 7,57 32 32 32 32 31 30 207,85 5,96 198,23 189,46 200 6 20 5,30 152,77 138,85 136,18 101,90 95,57 10 100 3 79,20 70,78 66,06 53,98 48,73 39,30 24,60 23,57 22,54 0 11,71 - 0 2008 2009 2010 2011 2012 up to 3 Dec, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 03-Des-13 2013 Foreign Incoming Bids (%) Success Rate (%, RHS) Total Incoming Bid Total Bid Accepted Yield at Tenor 10 year (RHS) In the last auction, foreign participation reached 43%, much higher than the average Despite volatility in financial market since foreign participation in Government Debt Sec. June 2013, incoming bids are still robust Auction in 2013 which is 36.93% of total incoming bids. 13

14 480 400 320 240 160 80 - 18.520 12,88 2 Dec 13 Activity in the domestic bond market increasing 2012 13.511 Nov 13 15.524 Okt 13 18.556 Sep 13 11.263 14,12 2011 Aug 13 14.926 July 13 Turn Over Govt Bond 10 Y Turn Over 10 Y Govt Bond 11.081 Juni '13 9.092 May '13 7.932 5,15 2010 Apr '13 7.421 Mar '13 7.603 Feb '13 6.657 Average daily trading (IDR Trilion) Jan '13 7,04 9.219 2009 2012 7.671 Volume (billion rupiah) - LHS 2011 4.963 2010 3.420 Frequency - RHS 2009 5,12 4.235 2008 2008 5.899 2007 3.307 2006 2.549 2005 15,00 12,00 9,00 6,00 3,00 - 24.000 18.000 12.000 6.000 - Des'13 Okt'13 Aug-13 Secondary Market Performance As of Dec 6, 2013 Agust'13 Jun'13 Yield of Benchmark Series trend to pick up Mar-13 Apr'13 10Y 20Y Feb'13 Up to Dec 6, 2013 Des'12 Oct-12 Okt'12 Agust'12 Bid Ask Spread 10 Y Govt Bond Jun'12 15Y 5Y May-12 Apr'12 Feb'12 Des'11 Dec-11 Okt'11 Agust'11 Jun'11 Jul-11 Apr'11 Eurozone sovereign Feb'11 Des'10 Feb-11 debt crisis Okt'10 Agust'10 Jun'10 Sep-10 Global Financial Apr'10 Feb'10 Des'09 Apr-10 Crisis Okt'09 Agust'09 Jun'09 Nov-09 Apr'09 [In Percentage] Feb'09 Jun-09 Des'08 Okt'08 Agust'08 Jan-09 Jun'08 Apr'08 80 60 40 20 0 8,00 6,00 4,00 2,00 22,00 20,00 18,00 16,00 14,00 12,00 10,00