Government Debt Securities Management January 27, 2014 Directorate - PowerPoint PPT Presentation

Government Debt Securities Management January 27, 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 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 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 Debt • Central Bank - Hittable of PDs quotation Securities • Pension Funds • Securities • SUKUK Company Secondary Market • Retail Investor Activities: • • Domestic Buyback, Debt switch, Securities Lending Potential Infrastructure: • Investors Buyback System, Primary Dealers, Selling Agent, Repo, Benchmark Yield Curve , Brokers/Dealers, Price Discovery Mechanism (IBPA, Reporting System) Regulation and Supervision Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |5

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 |6

Securities Financing Realization 2014 (Million IDR) % Realization Realization Budget 2014 to Budget (ao January 24, 2014) 2014 Government Securities Maturing in 2014 165.292.745 8.630.000 5,22% Government Securities Net 205.068.831 80.238.000 39,13% Buyback 3.000.000 - 0,00% Issuance Need 2013 * 370.361.576 88.868.000 23,99% Government Debt Securities (GDS) 85.868.000 Domestic GDS 37.400.000 - Coupon GDS (Auction, Private Placement) 20.000.000 - Conventional T-Bills (Auction, Private Placement) 5.000.000 - SPNNT 20140303 12.400.000 - Retail Bonds - International Bonds 48.468.000 - USD Global Bonds 48.468.000 - USD Domestic Bonds Government Islamic Debt Securities 3.000.000 Domestic Government Islamic Debt Securities 3.000.000 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 |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 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |8

Government Securities Financing Gross (2014) Indicative DOMESTIC: 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 and Redemption 135,893 Sukuk Retail.  Private Placement (SDHI) Cash Management 14,000 INTERNATIONAL BOND Buyback 3,000  Issuance of International Bonds as complement Govt Securities (gross) 357,962 to avoid crowding out in domestic market and provide benchmark for corporate issuance, consist Domestic 80.5% of USD, YEN or EURO global bonds  Maximum issuance international bond 20% from Auction 69.4% target gross Retail (Convensional/Islamic) 10.5% Issuing the Government Securities using Front Loading Strategy in the first semester Private Placement/Non Tradable 0.6% Foreign 19.5% Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |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: • unguaranted Samurai bonds issuance • debt switch many to many 2. Government Securities Liquidity • staple bonds • global bond liability management Enhancement: • reopening SPN 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 60 13,97 435,04 430,59 11,92 11,86 50 393,41 52 400 12 50 48 10,42 10,14 10,04 10,01 45 40 315,91 42 8,42 300 9 39 38 37 8,49 30 7,57 32 32 32 32 31 30 207,85 5,96 198,23 189,46 200 6 5,30 20 152,77 138,85 136,18 101,90 95,57 10 100 3 79,20 70,78 66,06 59,68 53,98 48,73 39,30 37,40 24,60 23,57 22,54 0 11,71 - 0 2008 2009 2010 2011 2012 2013 a.o. 27 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 21-Jan- Jan, 2014 Foreign Incoming Bids (%) Success Rate (%, RHS) 14 Total Incoming Bid Total Bid Accepted Yield at Tenor 10 year (RHS) During 2013, foreign participation in domestic bond Despite volatility in financial market since June auction was higher than 2012. In the first auction of 2013, incoming bids are still robust 2014, foreign demand still continues to hike . Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |13