Government Debt Securities Management

Transcription

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

2 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

3 Government Securities Management and Financing Strategy

4 General Strategy for Debt Financing 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

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

6 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

7 Financing Trend, (trillion IDR) 250 2,5 2, , ,6 1,8 1,7 1, ,1 0,9 1,3 1,1 1,0 0,7 50 0,5 0,5 0 0, * 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 ,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 (0,5) Notes: * Preliminary Realization 2013 ** Budget 2014 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 7

8 Securities Financing Realization 2014 Budget 2014 Realization (ao 10 Maret, 2014) (Million IDR) % Realization to Budget 2014 Government Securities Net ,97% Government Securities Maturing in ,68% - Buyback ,17% Issuance Need 2014* ,36% Government Debt Securities (GDS) Domestic GDS Coupon GDS (Auction, Private Placement) Conventional T-Bills (Auction, Private Placement) SPNNT Retail Bonds - International Bonds USD Global Bonds USD Domestic Bonds Government Islamic Debt Securities Domestic Government Islamic Debt Securities 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

9 2014 Budget Financing in billion [in IDR billion] Rp Budget % to GDP A. Total Revenue ,8 16,07% - 0,00% B. Total E xpenditure ,3 17,76% C. Primary Balance (54.069,0) -0,52% D. Deficit ( ,5) -1,69% E. Financing ,5 1,69% I. Non Debt Financing (9.773,7) -0,09% II. Debt Financing ,2 1,78% 1. Government Securities (Net) ,8 1,98% 2. Foreign Loan (Net) (20.903,6) -0,20% + Disbursement ,7 0,38% - Program Loan 3.900,0 0,04% - Project Loan ,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) ,3 b. Growth (%) 6,0 c. Inflation (%) y-o-y 5,5 d. 3-month-SPN (%) 5,5 e. IDR/USD (average) Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 9

10 Government Securities Financing Gross (2014) Indicative Target Govt. Securities (net) Redemption SPNNT Cash Management Buyback Govt. Securities (gross) Financing Flexibility Govt. Securities (gross) adjusted Domestic 82,9% Auction 67,8% Non Auction 10,3% Private Placement/Non Tradable 4,8% Foreign 17,1% 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 of 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 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 10

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

12 Government Securities Performance

13 Primary Market Performance 2014 [IDR Trillion] ,97 10,14 10,01 11,86 10,04 315,91 7,57 393,41 430,59 435,04 8,49 8,11 15,00 12,00 9,00 80,000 70,000 60,000 50,000 Incoming Bids Awarded Bids Foreign Incoming Bids Foreign Awarded Bids % Foreign Incoming Bids (RHS) Average incoming bids 2013 = Rp12,01T/auction 60% 50% 40% ,73 22,54 95,57 39,30 189,46 136,18 70,78 66,06 198,23 79,20 101,90 5,96 138,85 5,30 152,77 207,85 150, Mar-14 79,65 6,00 3,00 0,00 40,000 30,000 20,000 10,000 Average awarded bids 2013 = Rp5,45T/auction 30% 20% 10% 0% 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, '14-10% Despite volatility in financial market since June 2013, incoming bids are still robust Govt bonds incoming bids on 4 th March 2014 issuance reached Rp39,1T, recorded as the highest incoming bids in 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 = Rp12,01T Average awarded bid 2014 = Rp8,9 T, while average awarded bid 2013 = Rp5,4 T. 1 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 13

14 Secondary Market Performance ,00 20,00 18,00 16,00 14,00 12,00 10,00 8,00 6,00 4,00 2,00 [In Percentage] Apr'08 Jun'08 Agust'08 Okt'08 Des'08 Feb'09 Apr'09 Yield of Benchmark Series trend to pick up Global Financial Crisis Eurozone sovereign debt crisis 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 As of March 13, 2014 Apr'12 5Y 15Y Jun'12 Agust'12 Okt'12 Des'12 Feb'13 10Y 20Y Apr'13 Jun'13 Agust'13 Okt'13 Des'13 Feb'14 Activity in the domestic bond market increasing Average daily trading (IDR Trilion) Volume (billion rupiah) - LHS Frequency - RHS Feb 14 Jan March Bid Ask Spread 10 Y Government Bond Up to March 7, 2014 Turn Over 10 Y Government Bond 0 Jan-14 Aug-13 Mar-13 Oct-12 May-12 Dec-11 Jul-11 Feb-11 Sep-10 Apr-10 Nov-09 Jun-09 Jan-09 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 14

15 Yield SBN on peer s market Indonesia Gov t bond yield post take highest increase among others in Asia region LCY 10 Year Government Bonds Latest Yield YTD Change (BP) MTD Change (BP) HK ID JP KR MY PH SG TH US VN Market Watch as of March 11, 2014 Source: Asian Bonds Online [in percentage] 10 Mar '14 3 Mar '14 10 Feb '14 9 Feb '12 23 Sep '11 27 Oct '08 13 Sep'05 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y10Y 15Y 20Y 30Y Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 15

16 Ownership of Tradable Domestic Government Securities (In IDR Trillion) Dec-09 Dec-10 Dec-11 Dec-12 Dec Mar-14 Banks 254,36 43,72% 217,27 33,88% 265,03 36,63% 299,66 36,73% 335,43 33,70% 369,59 34,71% Govt Institutions 22,50 3,87% 17,42 2,72% 7,84 1,08% 3,07 0,37% 44,44 4,47% 27,93 2,62% Non-Banks 304,89 52,41% 406,53 63,40% 450,75 62,29% 517,53 63,09% 615,38 61,83% 667,13 62,66% Mutual Funds 45,22 7,77% 51,16 7,98% 47,22 6,53% 43,19 5,27% 42,50 4,27% 43,16 4,05% Insurance Company 72,58 12,48% 79,30 12,37% 93,09 12,86% 83,42 10,17% 129,55 13,02% 138,93 13,05% Foreign Holders 108,00 18,56% 195,76 30,53% 222,86 30,80% 270,52 32,98% 323,83 32,54% 347,82 32,67% Pension Fund 37,50 6,45% 36,75 5,73% 34,39 4,75% 56,46 6,88% 39,47 3,97% 39,63 3,72% Securities Company 0,46 0,08% 0,13 0,02% 0,14 0,02% 0,30 0,04% 0,88 0,09% 0,53 0,05% Individual 32,48 3,26% 46,20 4,34% Others 41,12 7,07% 43,43 6,77% 53,05 7,33% 63,64 7,76% 46,68 4,69% 50,86 4,78% Total 581,75 100% 641,21 100% 723,61 100% 820,27 100% 995,25 100% 1.064,65 100% During , domestic financial institutions are picking up in size, however growth of ownership from this institution still lower than foreign investors. Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 16

17 Development of Domestic Institutional and Retail Investors Pension Fund Insurance Company 160 Rp153,75 T 40% 500 Rp497,03 T 50% ,06% Rp108,06 T 27,52% Rp125,68 T Rp137,13 T 30% 400 Rp356,40 T Rp417,70 T 40% 80 Rp86,55 T 24,66% 22,12% 20,34% 20% Rp207,80 T 29,36% Rp283,20 T 26,09% 20,09% 22,12% 19,74% 30% 20% 40 10% % SBN Bond Stock Mutual Funds Deposit Others - % SBN (RHS) 0% SBN Bond Stock Mutual Funds Deposit Others - % SBN (RHS) 0% 5,00% 4,50% 4,00% 3,50% 3,00% 2,50% 2,00% 1,50% 1,00% Individual Ownership (SBN) 4,20% Nominal Percent (RHS) 3,24% 3,28% 3,09% 2,82% 2,51% 2,27% 3,12% 4,35% ,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 Retail investor development in primary market 47,434 34,776 33,546 23,617 23,127 17,231 16,561 16,320 15,487 17,606 17,783 15,198 14,295 0,50% 0,00% ,000 5, ORI SR 17

18 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 Feb-14 6-Mar-14 Foreign Investor Activity 2014 Foreign Ownership - Proportion by Tenor Net Buyer (Seller) - Non Resident 100% 80% 60% 40% 20% 0% 46% 38% 45% 44% 46% 47% 32,98% 32,54% 33,48% 32,46% 30,53% 30,80% 25% 21% 28% 32% 31% 31% 17% 18% 8% 16% 13% 11% 11% 5% 10% 12% 3% 5% 6% 6% 8% 5% 6% 5% Dec-10 Dec-11 Dec-12 Dec-13 Feb-14 6-Mar-14 40,00% 20,00% 0,00% [In IDR Trillion] 30,00 20,00 10,00 0,00 (10,00) (20,00) (30,00) (40,00) (1,49) (29,29) 1,69 (4,99) Capital Inflows 8,06 13,11 (8,99) (2,27) 4,15 (0,08) (4,37) 10,13 (1,41) Capital inflows over total foreign holders 7,83 9,35 19,52 2,68 0,68 8,44 (0,88) 17,97 4,22 (19,98) 2,81 (1,76) 10,13 23,98 6,08 (0,37) 4,82 16,49 0,49 0,10 0,05 0,00 (0,05) (0,10) (0,15) >10 >5-10 >2-5 > % Foreign Ownership to Total (RHS) Foreign investors mostly dominated by real money long term investors Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 18

19 Crisis Management Protocol & Bond Stabilization Framework

20 Comprehensive Stabilization Framework to Pro-Actively Manage Capital Markets Pre-emptive Measures Implementing Crisis Management Protocol Implementing Bond Stabilization Framework Enhancing coordination between government institutions and continuous dialogue with market participants 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 preemptive instrument (CMIM) at technical Bond Stabilization Framework Crisis Management Protocol 4 Specific policies in place to address crisis enacted in the 2014 budget law DMO Budget SOE Budget Buyback Funds Related SOEs (min. Alert level) Buyback of government bonds by the DMO from the state budget Potential purchase of government bonds by State Owned Enterprises 5 6 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 Other Gov t Budget KUN (State s General Cash) (min. Alert level) PIP Investment Funds (min. Alert Level) SAL (min. Crisis 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 Purchase of government bonds using the accumulated cash surplus (SAL). Parliament approval is required Fiscal Buffers to Prevent and Mitigate Crisis 1 2 Deferred drawdown option facilities up to US$5bn 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 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 20

21 Debt Outstanding & Risk Profile

22 Government Debt Outstanding, # ) December 2013 ## ) Nominal % Total Debt of Central Gov. (in. trillion IDR) 1, , , , , , % a. Loan (in. trillion IDR) % 1). Foreign Loan % Bilateral *) % Multilateral **) % Commercial ***) % Suppliers ***) % 2). Domestic Loan % b. Gov. Debt Securities (in. trillion IDR) , , , , % Foreign Denominated % Rupiah Denominated , , % Total Debt of Central Gov. (equivalent with. billion US$) % Consist of : Rupiah Denominated Bond (billion US$) % Foreign Denominated Bond (billion US$) % Rupiah Denominated Loan (billion US$) % Foreign Denominated Loan % (billion US$) Currency Exchange (IDR\US$1) 10,950 9,400 8,991 9,068 9,670 12,189 Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 22

23 Government Debt Outstanding, Based on Currency 100% 90% 80% 1% 2% 2% 1% 1% 1% 2% 2% 2% 2% 2% 2% 6% 5% 4% 3% 3% 3% 21% 17% 18% 17% 14% 12% 70% 60% 22% 21% 21% 22% 24% 29% 50% 40% 30% 20% 48% 53% 54% 55% 56% 53% 10% 0% *) *) As of December 31, 2013 IDR USD JPY EUR SDR AUD Others Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 23

24 Favorable Govt. Debt Position and Sustainable Fiscal Deficit Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 24

25 Reduction in Central Government Debt Portfolio Risk Lower exchange rate volatility has lessened foreign debt impairment of Indonesia s fiscal strength Interest Rate Risk Steadily Declining Exchange Rate Risk on Downward Trend Active and disciplined government bond portfolio management emphasizing long average years to maturity and evenly spread debt maturities Long Average Years to Maturity Debt Maturity Evenly Spread Funding from domestic market and financial institutions is prioritized Directorate of Gov Debt Securities, DG of Debt Management Ministry of Finance Republic of Indonesia 25

26 END PRESENTATION Directorate General of Debt Management Ministry of Finance of Republic of Indonesia Directorate of Government Securities Frans Seda building, 4 th floor, Jl. Wahidin Raya No. 1, Jakarta Pusat Postal Code: Phone: Fax. : Site: