Government Debt Securities Management February 20, 2014 Directorate - PowerPoint PPT Presentation

Government Debt Securities Management February 20, 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: • Supply • Insurance Auction System for onshore USD issuance Company • Government • Mutual Fund Debt Secondary Market • Central Bank Securities • Pension Funds • Activities: • Securities Company Buyback, Debt switch, Securities Lending • SUKUK • Retail Investor Infrastructure: • • Deposit Insurance Electronic Trading Platform (ETP) for Retail Govt. Securities : Debt Switch • Corp. Program (Many to Many), Staplebonds, and Hittable of PDs quotation • Domestic Potential System : Primary Dealers, Selling Agent, Repo, Benchmark Yield Curve, • Investors 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 February 19, 2014) 2014 Government Securities Maturing in 2014 165.292.745 19.449.070 11,77% Government Securities Net 205.068.831 105.520.930 51,46% Buyback 3.000.000 455.000 15,17% Issuance Need 2014 * 370.361.576 124.970.000 33,74% Government Debt Securities (GDS) 113.118.000 Domestic GDS 64.650.000 - Coupon GDS (Auction, Private Placement) 42.250.000 - Conventional T-Bills (Auction, Private Placement) 10.000.000 - 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 11.852.000 Domestic Government Islamic Debt Securities 11.852.000 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) 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 |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 50 393.41 400 12 52 50 50 10.42 48 10.14 10.01 10.04 45 315.91 40 300 8.34 9 39 8.49 38 7.57 30 34 32 32 32 207.85 32 31 5.96 198.23 189.46 30 200 6 5.30 152.77 138.85 20 136.18 111.42 101.90 95.57 100 3 79.20 70.78 66.06 64.65 53.98 10 48.73 39.30 24.60 23.57 22.54 11.71 - 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 18-Feb- 2008 2009 2010 2011 2012 2013 a.o. 18 14 Feb, 2014 Total Incoming Bid Total Bid Accepted Yield at Tenor 10 year (RHS) Foreign Incoming Bids (%) Success Rate (%, 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