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Directorate of Government Debt Securities Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia Government Securities.

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Presentation on theme: "Directorate of Government Debt Securities Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia Government Securities."— Presentation transcript:

1 Directorate of Government Debt Securities Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia Government Securities Management February 16 th, 2015

2 OUTLINE 1.Government Securities Management and Financing Strategy 2.Government Securities Performance 3.Crisis Management Protocol & Bond Stabilization Framework 4.Debt Outstanding & Risk Profile 2

3 Government Securities Management and Financing Strategy

4 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 4

5 Financing Trend, 2004 – 2015 (trillion IDR) Notes: * Preliminary 2014 ** Revised Budget 2015 5

6 Securities Financing Realization 2015 *Adjusted by changes in Cash Management & Debt Switch 6

7 General Strategy for Debt Financing 2015 1. Optimizes Governments securities (SBN) issuance from domestic sources to fulfill Budget need and uses foreign debts as complimentary; 2. Determines debt instrument by taken into account of market need in regard to market development and portfolio management; 3. Issues Retail Bond for instrument diversification and financial inclusion ; 4. Optimizes foreign and domestic loan instrument to fulfill Budget need on capital expenditure ; 5. Conducts active portfolio management of Government securities through, among others, debt buyback and debt switch, in order to promote market liquidity and stability; 6. Strengthens 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. 7

8 Government Budget FY 2015 8 In billion IDR Financing sources Revised Budget 2015 come from debt financing (85.78% from Government Securities, 9.62% from Loan) and the rest 4.61% from non debt financing. In the proposed Revised Budget 2015 (RAPBN-P 2015), deficit is narrowing from 2.21% to 1.91% of GDP  To maintain resilience and fiscal sustainability Despite lower budget deficit, net debt in 2015 is higher  Government injects equity to SOE’s to increase their capacity to support the achievement of the national priority agenda Stand-by loans are in place to anticipate adverse situations.

9 Government Securities Financing (Gross) Revised Budget 2015 9 Domestic: Auction:  conventional securities: 23 x  Islamic securities: 22 x Non-Auction:  retail bonds: ORI + Sukuk Retail. International Bonds: 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 22.6% from target gross Issuance targets for GDS, Sukuk and ATM target: –GDS (SUN): 79.9% –Sukuk: 20.1% –ATM for auctions: 8.2 year Front Loading strategy: in the first semester is targeted at 60.3%. for domestic issuance is also targeted at first semester at 55.2% FR 69 – 5 Y FR 70 – 10 Y FR 71 – 15 Y FR 68 – 20 Y Benchmark Series for 2014 & 2015

10 Government Securities Performance

11 11 Average Foreign incoming bids 2015 is Rp11,95T, compare to period in 2014, which reached 7,85T Average incoming bids 2015 = Rp38,49T, increased from average incoming bids 2014 = Rp23,37T Average awarded bid 2015 = 14,33 while average awarded bid 2014 = Rp11,29 T. *as of February 16,2015 Average incoming bids 2014 = Rp23,37T/auction Average awarded bids 2014 = Rp11,29T/auction Government Debt Securities Primary Market Performance 2015

12 12 Average Foreign incoming bids 2015 is Rp9,16T vs Rp8,93T of average foreign incoming bids in 2014 Average incoming bids 2015 = Rp28,35, increased from average incoming bids 2014 = Rp14,19T Average awarded bid 2015 = Rp9,81 T, while average awarded bid 2014 = Rp6,59T. *as of February 16, 2015 Avr. Awarded bids 2014 = 6,59T Avr. Incoming Bid 2014: 14,19T Avr. Foreign Incoming Bid 2014: 8,93T Government Securities Primary Market Performance 2015

13 (IDR Trilion) Global Financial Crisis Eurozone sovereign debt crisis [In Percentage] As of Feb 13, 2015 Activities of the domestic bonds are growing Yields of Benchmark Series steadily decrease Bid Ask Spread 10 Y Government Bond Turn Over 10 Y Government Bond As of Feb 13, 2015 Secondary Market Performance Spread 9.8 bps (ask 7.347%, bid 7.445%) 13

14 LCY 10 Year Government Bonds Latest YieldYTD Change (BP) MTD Change (BP) HK1.417-44.20.0 ID7.495-30.1+32.7 JP0.424+9.5+14.6 KR2.397-20.8+15.7 MY3.859-28.8+2.8 PH3.418-44.5+25.5 SG2.093-18.7+21.3 TH2.761+3.2+14.5 US2.050-12.1+41.0 VN6.588-64.2-1.2 Market Watch as of Feb 13, 2015 Source: Asian Bonds Online Yield GS on peer’s market (a.o. February 13, 2015) 14

15 Ownership of Tradable Domestic Government Securities In the end of January 2015, foreign investor ownership record the highest percentage of ownership, showing their increasing appetite on the Indonesia’s government securities. (In IDR Trillion) 15

16 Domestic Institutional Investors Pension Fund Insurance Company Mutual Fund Source: Financial Service Authority (OJK), data processsed 16

17 Individual & Retail Investors Retail Govt Securities investors in primary market Individual Ownership 17

18 Foreign Investor Activity 2014 Net Buyer (Seller) - Non ResidentForeign Ownership - Proportion by Tenor [In IDR Trillion] Foreign investors mostly dominated by high quality long term investors 18

19 Crisis Management Protocol & Bond Stabilization Framework

20 Comprehensive Stabilization Framework to Pro-actively Manage Pressures on Financial Sector Swap facility arrangements based on international cooperation & Deferred drawdown option facilities Implementing Crisis Management Protocol Implementing Bond Stabilization Framework Enhancing coordination between government institutions and continuous dialogue with market participants Specific articles in the 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 Specific articles in the 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 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 FKSSK has conducted two crisis simulations: Full Dress Simulation (ministerial level) and activation of pre-emptive instrument (CMIM) at technical level 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 FKSSK has conducted two crisis simulations: Full Dress Simulation (ministerial level) and activation of pre-emptive instrument (CMIM) at technical level Crisis Management Protocol Potential purchase of government bonds by State Owned Enterprises 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. Alert Level) SAL (min. Crisis Level) Purchase of government bonds using the accumulated cash surplus (SAL). Parliament approval is required Bond Stabilization Framework Potential purchase of government bonds by BPJS Workforce and BPJS Healthcare BPJS Budget* BPJS Workforce and BPJS Healthcare funds *Based on MoU between MoF and BPJS (Social Security Agency) Workforce & BPJS Healthcare that has been signed on Sept 1, 2014. 1 2 3 1 2 20

21 Debt Outstanding & Risk Profile

22 Maturity Profile Central Government Debt as of End of Jan 2015 Maturity Profile of Central Debt Government by Currency (in trillion Rp) Maturity Profile of Central Government Debt by Instruments (in trillion Rp) 22

23 Outstanding Central Government Debt by Instrument 23

24 Outstanding Central Government Debt by Currency 24

25 Central Government Debt Ratios Debt to GDP Ratio Interest Payment to Revenue and Expenditure Ratio Debt Service to GDP Ratio Interest Payment to Tax Revenue & Central Government Expenditure Ratio 25 Notes: * Preliminary Figures

26 Risk Indicators 26  Risk indicators are improving amidst pressure from rupiah depreciation  Risk indicators show improvements in interest rate risk and stability in exchange and refinancing risks Interest Rate Risk Exchange Rate Risk Debt Maturing in 1,3, and 5 years Average Time To Maturity (ATM) - Years *Preliminary Figures

27 Primary Market Performance 2015: Global Bonds (USD) 27 Allocation by Geography Allocation by Investor Type RI0125 RI0145

28 END OF PRESENTATION Directorate General of Debt Management Ministry of Finance of Republic of Indonesia Directorate of Government Debt Securities Frans Seda building, 4 th floor, Jl. Wahidin Raya No. 1, Jakarta Pusat – Postal Code: 10710 Phone: +6221 3810175 Fax. : +6221 3846516 Site: www.djpu.kemenkeu.go.id

29 Securities Financing Realization 2014 *Adjusted by changes in Cash Management & Debt Switch 29


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