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

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

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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

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SLIDE 1

Government Debt Securities Management

February 20, 2014

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

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SLIDE 2

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

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SLIDE 3

Government Securities Management and Financing Strategy

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SLIDE 4

General Strategy for Debt Financing 2014

  • 1. Prioritizing the issuance of domestic government securities to support market development and risk management
  • f 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

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SLIDE 5

Government Securities Market Development Framework

Supply

  • Government

Debt Securities

  • SUKUK

Demand

  • Banks
  • Foreigners
  • Insurance

Company

  • Mutual Fund
  • Central Bank
  • Pension Funds
  • Securities Company
  • Retail Investor
  • Deposit Insurance

Corp.

  • Domestic Potential

Investors

Deep & Liquid Market

Sufficient Market Absorption & Efficient Price/Yield

Primary Market

  • Activities:

Regular Issuance (Book building, Issuance, Private Placement)

  • Infrastructure:

Auction System for onshore USD issuance

Secondary Market

  • Activities:

Buyback, Debt switch, Securities Lending

  • Infrastructure:
  • Electronic Trading Platform (ETP) for Retail Govt. Securities : Debt Switch

Program (Many to Many), Staplebonds, and Hittable of PDs quotation

  • System : Primary Dealers, Selling Agent, Repo, Benchmark Yield Curve,

Brokers/Dealers, Price Discovery Mechanism (IBPA, Reporting System)

MARKET INFRASTRUCTURE

Regulation and Supervision

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |5

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SLIDE 6

Financing Trend, 2004 – 2014

(trillion IDR) Notes: * Preliminary Realization 2013 ** Budget 2014

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |6

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

1,1 0,5 0,9 1,3 0,1 1,6 0,7 1,1 1,8 2,2 1,7

(0,5)

  • 0,5

1,0 1,5 2,0 2,5

  • 50

50 100 150 200 250

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SLIDE 7

Securities Financing Realization 2014

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |7

*Adjusted by changes in Cash Management & Debt Switch

(Million IDR) Budget 2014

Realization (ao February 19, 2014)

% Realization to Budget 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

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SLIDE 8

2014 Budget Financing

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |8

[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

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SLIDE 9

Government Securities Financing Gross (2014)

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

DOMESTIC:  Auction:

  • 23 times of conventional securities auction
  • 20 times of islamic securities auction

 Non-Auction

  • Retail bonds, consist of ORI, Saving Bond and

Sukuk Retail.

 Private Placement (SDHI)

INTERNATIONAL BOND  Issuance of International Bonds as complement to avoid crowding out in domestic market and provide benchmark for corporate issuance, consist

  • f USD, YEN or EURO global bonds

 Maximum issuance international bond 20% from target gross

Issuing the Government Securities using Front Loading Strategy in the first semester

Indicative Target

  • Govt. Securities (net)

205.069 Redemption 135.893 SPNNT 20140303 12.400 Cash Management 14.000 Buyback 3.000

  • Govt. Securities (gross)

370.362 Financing Flexibility 6.550

  • Govt. Securities (gross) adjusted

363.812 Domestic 82,9% Auction 67,8% Non Auction 10,3% Private Placement/Non Tradable 4,8% Foreign 17,1%

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SLIDE 10

Government Debt Securities Operation Plan (2014)

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |10

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
  • unguaranted Samurai bonds issuance
  • 1. Issuance:
  • debt switch many to many
  • staple bonds
  • global bond liability management
  • reopening SPN
  • 2. Government Securities Liquidity

Enhancement:

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SLIDE 11

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |11

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)
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SLIDE 12

Government Securities Performance

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SLIDE 13

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |13

Primary Market Performance 2014

During 2013, foreign participation in domestic bond auction was higher than 2012. In the first auction of 2014, foreign demand still continues to hike. Despite volatility in financial market since June 2013, incoming bids are still robust

48 32 45 39 32 38 34 52 31 30 32 32 50 50

10 20 30 40 50 60 2008 2009 2010 2011 2012 2013 a.o. 18 Feb, 2014

Foreign Incoming Bids (%) Success Rate (%, RHS)

24.60 53.98 48.73 95.57 189.46 136.18 198.23 315.91 393.41 430.59 435.04 111.42 11.71 23.57 22.54 39.30 70.78 66.06 79.20 101.90 138.85 152.77 207.85 64.65 11.92 10.42 13.97 10.14 10.01 11.86 10.04 7.57 5.96 5.30 8.49 8.34

3 6 9 12 15

  • 100

200 300 400 500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 18-Feb- 14

Total Incoming Bid Total Bid Accepted Yield at Tenor 10 year (RHS)

[IDRTrillion]

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SLIDE 14

2,00 4,00 6,00 8,00 10,00 12,00 14,00 16,00 18,00 20,00 22,00

Apr'08 Jun'08 Agust'08 Okt'08 Des'08 Feb'09 Apr'09 Jun'09 Agust'09 Okt'09 Des'09 Feb'10 Apr'10 Jun'10 Agust'10 Okt'10 Des'10 Feb'11 Apr'11 Jun'11 Agust'11 Okt'11 Des'11 Feb'12 Apr'12 Jun'12 Agust'12 Okt'12 Des'12 Feb'13 Apr'13 Jun'13 Agust'13 Okt'13 Des'13 Feb'14

5Y 10Y 15Y 20Y

20 40 60 80

Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Jan-14

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |14

Secondary Market Performance 2014

Average daily trading (IDR Trilion)

Up to Feb 19, 2014

Global Financial Crisis

Eurozone sovereign debt crisis

[In Percentage]

As of Feb 19, 2014

Activity in the domestic bond market increasing Yield of Benchmark Series trend to pick up Bid Ask Spread 10 Y Government Bond Turn Over 10 Y Government Bond

2.549 3.307 5.899 4.235 3.421 4.963 7.671 9.180 6.657 7.603 7.421 7.932 9.092 11.081 12.330 11.263 18.556 15.524 13.511 23.323 16.183 18.946

  • 80

160 240 320 400 480

  • 6.000

12.000 18.000 24.000 30.000 2005 2006 2007 2008 2009 2010 2011 2012 Jan '13 Feb '13 Mar '13 Apr '13 May '13 Juni '13 July 13 Aug 13 Sep 13 Okt 13 Nov 13 Dec 13 Jan 14 18 Feb 14

Volume (billion rupiah) - LHS Frequency -RHS

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SLIDE 15

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |15

Yield SBN on peer’s market

LCY 10 Year Government Bonds Latest Yield YTD Change (BP) MTD Change (BP)

HK 2.204

  • 10.1
  • 2.8

ID 8.364

  • 8.8
  • 66.7

JP 0.605

  • 13.6
  • 1.7

KR 3.498

  • 8.7
  • 11.7

MY 4.103

  • 2.5
  • 14.3

PH 4.050 +45.0

  • 7.3

SG 2.470

  • 9.0

+1.0 TH 3.815

  • 8.2
  • 17.8

US 2.739

  • 28.9

+9.5 VN 9.050 0.0 +5.0

  • Market Watch as of February 20, 2014
  • Source: Asian Bonds Online

Indonesia Gov’t bond yield post take highest increase among others in Asia region

  • 2.0

4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y10Y 15Y 20Y 30Y

19 Feb '14 12 Feb '14 17 Jan '14 9 Feb '12 23 Sep '11 27 Oct '08 13 Sep'05 [in percentage]

Tenor 19-Feb-14 12-Feb-14 17-Jan-14 9-Feb-12 23-Sep-11 27-Oct-08 13 Sep'05 1Y 6.78 7.23 7.35 3.30 5.29 19.37 2Y 7.29 7.49 7.67 4.21 6.01 17.35 14.59 3Y 7.61 7.80 7.77 4.33 6.13 19.93 4Y 7.90 7.96 7.97 4.39 6.54 17.17 14.14 5Y 7.79 7.89 7.78 4.44 6.69 17.46 14.96 6Y 8.18 8.52 8.16 4.79 6.81 17.05 15.24 7Y 8.29 8.67 8.31 4.88 7.08 17.06 16.17 10Y 8.35 8.79 8.40 5.02 7.43 20.91 15.75 15Y 8.94 9.33 8.93 5.47 7.83 16.65 14.12 20Y 9.04 9.37 8.77 5.96 8.20 20.27 30Y 9.30 9.62 9.25 6.17 8.29 20.37

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SLIDE 16

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |16

Ownership of Tradable Domestic Government Securities

During 2009 – 2013, domestic financial institutions are picking up in size, however growth of ownership from this institution still lower than foreign investors.

(In IDR Trillion)

Banks 254,36 43,72% 217,27 33,88% 265,03 36,63% 299,66 36,73% 335,43 33,70% 339,66 33,10% Govt Institutions 22,50 3,87% 17,42 2,72% 7,84 1,08% 3,07 0,37% 44,44 4,47% 46,51 4,53% Non-Banks 304,89 52,41% 406,53 63,40% 450,75 62,29% 517,53 63,09% 615,38 61,83% 639,86 62,36% Mutual Funds 45,22 7,77% 51,16 7,98% 47,22 6,53% 43,19 5,27% 42,50 4,27% 43,77 4,27% Insurance Company 72,58 12,48% 79,30 12,37% 93,09 12,86% 83,42 10,17% 129,55 13,02% 137,24 13,38% Foreign Holders 108,00 18,56% 195,76 30,53% 222,86 30,80% 270,52 32,98% 323,83 32,54% 337,95 32,94% Pension Fund 37,50 6,45% 36,75 5,73% 34,39 4,75% 56,46 6,88% 39,47 3,97% 40,04 3,90% Securities Company 0,46 0,08% 0,13 0,02% 0,14 0,02% 0,30 0,04% 0,88 0,09% 0,76 0,07% Individual 32,48 3,26% 30,45 2,97% Others 41,12 7,07% 43,43 6,77% 53,05 7,33% 63,64 7,76% 46,68 4,69% 49,66 4,84% Total 581,75 100% 641,21 100% 723,61 100% 820,27 100% 995,25 100% 1.026,02 100% 18-Feb-14 Dec-11 Dec-13 Dec-10 Dec-09 Dec-12

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SLIDE 17

Development of Domestic Institutional and Retail Investors

17

Pension Fund Insurance Company

Retail investor development in primary market

Individual Ownership (SBN)

16,561 33,546 47,434 23,617 16,320 15,198 23,127 34,776 14,295 17,231 15,487 17,606 17,783

  • 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 2006 2007 2008 2009 2010 2011 2012 2013

ORI SR

3,09% 2,82% 2,51% 2,27% 4,20% 3,24% 3,28% 3,12% 3,12% 2,97% 5 10 15 20 25 30 35 40 45 0,00% 0,50% 1,00% 1,50% 2,00% 2,50% 3,00% 3,50% 4,00% 4,50% Nominal Percent (RHS)

29,06% 27,52% 24,66% 22,12% 20,34% 0% 10% 20% 30% 40%

  • 40

80 120 160 2008 2009 2010 2011 2012 SBN Bond Stock Mutual Funds Deposit Others

  • % SBN (RHS)

Rp86,55 T Rp108,06 T Rp125,68 T Rp137,13 T Rp153,75 T 29,36% 26,09% 20,09% 22,12% 19,74% 0% 10% 20% 30% 40% 50%

  • 100

200 300 400 500 2008 2009 2010 2011 2012

SBN Bond Stock

Mutual Funds

Deposit Others

  • % SBN (RHS)

Rp207,80 T Rp283,20 T Rp356,40 T Rp417,70 T Rp497,03 T

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SLIDE 18

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |18

Foreign Investor Activity 2014

Net Buyer (Seller) - Non Resident Foreign Ownership - Proportion by Tenor

[In IDR Trillion]

Foreign investors mostly dominated by real money long term investors

4% 10% 12% 8% 6% 5% 5% 6% 5% 5% 8% 3% 5% 5% 5% 6% 20% 18% 17% 16% 13% 13% 13% 12% 22% 21% 25% 28% 32% 32% 32% 32% 49% 46% 38% 45% 44% 44% 45% 45%

19% 30,53% 30,80% 32,98% 32,31% 32,54% 32,45% 32,94% 0% 20% 40%

0% 20% 40% 60% 80% 100%

Dec-09 Dec-10 Dec-11 Dec-12 Nov-13 Dec-13 Jan-14 18-Feb-14

>10 >5-10 >2-5 >1-2 0-1 % Foreign Ownership to Total (RHS)

(1,49) (29,29) 1,69 (4,99) 8,06 13,11 (8,99) (2,27) 4,15 (4,37) (0,08) 10,13 (1,41) 7,83 9,35 19,52 0,68 2,68 8,44 (0,88) 17,97 4,22 (19,98) 2,81 (1,76) 10,13 23,98 6,08 (0,37) 4,82 9,30 (0,15) (0,10) (0,05) 0,00 0,05 0,10 (40,00) (30,00) (20,00) (10,00) 0,00 10,00 20,00 30,00

Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 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 18-Feb-14

Capital Inflows Capital inflows over total foreign holders

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SLIDE 19

Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia |19

Deferred drawdown option facilities up to US$5bn Implementing Crisis Management Protocol Implementing Bond Stabilization Framework Enhancing coordination between government institutions and continuous dialogue with market participants Specific policies in place to address crisis enacted in the 2014 budget law Swap facility arrangements based on international cooperation with a total value of US$47.76bn (China, Japan and South Korea BSA) Chiang Mai Initiative Multilateralization Specific articles in the 2014 State Budget Law that provide flexibility for Government to take quick mitigation action if necessary, with Parliament approval that has to be given within 24 hours

Pre-emptive Measures Fiscal Buffers to Prevent and Mitigate Crisis

 The FKSSK, Consists of Minister of Finance, BI Governor, Head of Indonesian FSA and Head of Indonesian Deposit Insurance Corporation, manages the Nationwide Crisis Management Protocol (CMP) Framework as guidance and procedures for national crisis prevention and mitigation measures.  The nationwide CMP incorporates the Exchange Rate, Banking, Non-Bank Financial Institution, Capital Market, Government Bonds Market (SBN), and Fiscal CMPs.  Coordination Meeting is conducted regularly to discuss and assess the current level of Financial System Stability and current issues related to the financial system  In 2013, FKSSK has conducted two crisis simulations: Full Dress Simulation (ministerial level) and activation of pre- emptive instrument (CMIM) at technical Crisis Management Protocol

Potential purchase of government bonds by State Owned Enterprises in primary market (min. Aware Level) and in secondary market (min. Alert Level)

Buyback Funds DMO Budget SOE Budget Other Gov’t Budget Buyback of government bonds by the DMO from the state budget Related SOEs (min. Alert level) KUN (State’s General Cash) (min. Alert level) Potential purchase of government bonds by the Treasury Office using the State’s General Cash (KUN) Potential purchase of government bonds by the Indonesia Investment Agency PIP Investment Funds (min. Aware Level) SAL (min. Crisis Level) Purchase of government bonds using the accumulated cash surplus (SAL). Parliament approval is required Bond Stabilization Framework 1 2 3 4 5 1 6 2

Comprehensive Stabilization Framework to Pro-Actively Manage Capital Markets

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SLIDE 20

END PRESENTATION

Directorate General of Debt Management Ministry of Finance of Republic of Indonesia Directorate of Government Securities Frans Seda building, 4th floor,

  • Jl. Wahidin Raya No. 1, Jakarta Pusat – Postal Code: 10710

Phone: +6221 3810175

  • Fax. : +6221 3846516

Site: www.djpu.depkeu.go.id