Government Debt Securities Management March 12, 2014 Directorate of - PowerPoint PPT Presentation

Government Debt Securities Management March 12, 2014 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia

Outline 1. Government Securities Management and Financing Strategy 2. Government Debt Securities Market Performance & Statistics 3. Crisis Management Protocol & Bond Stabilization Framework 4. Debt Outstanding & Risk Profile Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |2

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; 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. Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |4

Government Securities Market Development Framework Deep & Liquid Market Sufficient Market Absorption & Efficient Price/Yield MARKET INFRASTRUCTURE Primary Market 1. Activities: Demand Regular Issuance (Auction, Book building, Private Placement) • Banks 2. Infrastructure: • Foreigners • Auction System for domestic and onshore USD issuance Supply • Insurance • Settlement system for retail bonds Company • Government • Mutual Fund Secondary Market Debt • Central Bank 1. Activities: Securities • Pension Funds Buyback, Debt switch, Securities Lending • Securities Company 2. Infrastructure: • SUKUK • Retail Investor Electronic Trading Platform (ETP): for retail and conventional bonds. • • Deposit Insurance System Development: Debt Switch Program (Many to Many), Staplebonds, Corp. and Hittable of PDs quotation • Domestic Potential System : Primary Dealers quotation, Exchange Trading Mechanism, OTC • Investors Trading system 3. Price Discovery Mechanism: Benchmark Yield Curve, IBPA, Reporting System 4. Repo & Derivative Instruments: GMRA & Government Bond Futures Regulation and Supervision Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |5

Key Initiatives to Develop Domestic Gov. Securities Market Facilitating the development of derivative instrument and Government securities repo: • Develop a deep and liquid repo market, coordinate with FSA • Facilitating the development of Government Bond Futures Focused on a few benchmark series with large outstanding Introduction of an electronic trading platform(ETP) Strengthening Investor Relations (IR) Launch a new primary dealer system Increase domestic participation from key investors Continuously improving bond stabilization framework Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |6

Financing Trend, 2004 – 2014 (trillion IDR) 250 2,5 2,2 200 2,0 1,8 1,7 1,6 150 1,5 1,3 1,1 1,1 100 1,0 0,9 0,7 50 0,5 0,5 0,1 0 - -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 91,1 119,9 159,7 224,6 205,1 Domestic Loan - - - - - 0,4 0,6 0,8 0,2 1,0 External Loan - net (28,1) (10,3) (26,6) (26,6) (18,4) (12,4) (4,6) (17,8) (23,5) (13,3) (20,9) Others/Non-Debt - net 42,0 (1,2) 20,0 9,1 16,6 25,5 4,6 28,3 38,1 18,6 (9,8) Budget Defisit, % to GDP 1,1 0,5 0,9 1,3 0,1 1,6 0,7 1,1 1,8 2,2 1,7 Notes: * Preliminary Realization 2013 ** Budget 2014 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |7

Securities Financing Realization 2014 (Million IDR) % Realization Realization Budget 2014 to Budget (ao 10 Maret, 2014) 2014 Government Securities Net 205.068.831 108.626.315 52,97% Government Securities Maturing in 2014 165.292.745 55.674.180 33,68% - Buyback 3.000.000 455.000 15,17% Issuance Need 2014 * 370.361.576 164.300.495 44,36% Government Debt Securities (GDS) 132.125.150 Domestic GDS 79.650.000 - Coupon GDS (Auction, Private Placement) 54.250.000 - Conventional T-Bills (Auction, Private Placement) 13.000.000 - SPNNT 20140303 12.400.000 - Retail Bonds - International Bonds 52.475.150 - USD Global Bonds 48.468.000 - USD Domestic Bonds 4.007.150 Government Islamic Debt Securities 32.175.345 Domestic Government Islamic Debt Securities 32.175.345 Global Sukuk - *Adjusted by changes in Cash Management & Debt Switch Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |8

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 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |9

Government Securities Financing Gross (2014) DOMESTIC: Indicative Target  Auction: Govt. Securities (net) 205.069  23 times of conventional securities auction  20 times of islamic securities auction Redemption 135.893  Non-Auction SPNNT 20140303 12.400  Retail bonds, consist of ORI, Saving Bond and Cash Management 14.000 Sukuk Retail.  Private Placement (SDHI) Buyback 3.000 Govt. Securities (gross) 370.362 INTERNATIONAL BOND  Issuance of International Bonds as complement Financing Flexibility 6.550 to avoid crowding out in domestic market and Govt. Securities (gross) adjusted 363.812 provide benchmark for corporate issuance, consist of USD, YEN or EURO global bonds Domestic 82,9%  Maximum issuance international bond 20% from Auction 67,8% target gross Non Auction 10,3% Issuing the Government Securities using Front Private Placement/Non Tradable 4,8% Loading Strategy in the first semester Foreign 17,1% Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |10

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

Government Securities Performance

Primary Market Performance 2014 [IDRTrillion] 500 15,00 80,000 60% 13,97 Incoming Bids Awarded Bids Foreign Incoming Bids Foreign Awarded Bids % Foreign Incoming Bids (RHS) 435,04 430,59 11,86 70,000 393,41 50% 400 12,00 Average incoming bids 10,14 10,04 2013 = Rp12,01T/auction 10,01 60,000 315,91 40% 300 8,49 9,00 8,11 7,57 50,000 30% Average awarded bids 207,85 5,96 198,23 189,46 2013 = Rp5,45T/auction 200 6,00 40,000 5,30 152,77 150,54 138,85 136,18 20% 30,000 101,90 95,57 100 3,00 79,20 70,78 79,65 66,06 10% 48,73 39,30 20,000 22,54 - 0,00 0% 10,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 04-Mar-14 - -10% Total Incoming Bid Total Bid Accepted Yield at Tenor 10 year (RHS) Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar 4, '14 • Govt bonds incoming bids on 4 th March 2014 issuance reached Rp39,1T, Despite volatility in financial market since June recorded as the highest incoming bids in 2013-2014. 2013, incoming bids are still robust • Average foreign incoming bids from Jan-Mar 2014 reach 30,2%, higher than the same period in 2013, which only reach 28,1%. • Average incoming bids 2014 = Rp20,9 T, while average incoming bids 2013 = 1 Rp12,01T • Average awarded bid 2014 = Rp8,9 T, while average awarded bid 2013 = Rp5,4 T. Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |13