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TRANSCRIPT
August 11th, 2017
Government Debt Securities Management
Directorate of Government Debt SecuritiesDirectorate General of Budget Financing and Risk Management
Ministry of Finance of The Republic of Indonesia
Outline
Introduction 31
Legal Framework of Government Debt Securities 112
Front Office Operations 153
Accessing International Capital Market 264
Developing Government Securities 325
Introduction
Organizational Structure
Directorate of Government Debt
Securities
Division
Government Debt Securities Portfolio
Management
Division
Government Debt Securities Market
Development
Division
Financial & Government Debt Securities Market
Analysis
Division
Government Debt Securities
Regulation and Performance Evaluation
1 Director, 4 Deputy Director that each of Deputies has 4 Managers
4
Milestone of GDS Management
5
Financing Trend, 2006 – 2017
Notes:* Revised Budget 2016** Budget 2017
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017**
Gov't Securities (Net) 35.99 57.17 85.92 99.47 91.10 119.86 159.70 224.67 264.63 362.30 364.90 399.90
Domestic Loan (Net) - - - - 0.39 0.62 0.80 0.47 0.95 0.80 3.39 1.49
Foreign Loan (Net) (26.57) (26.58) (18.41) (12.42) (4.57) (17.80) (23.46) (5.81) (12.35) 15.30 2.53 (16.79)
Others/Non Debt (Net) 20.00 9.14 16.56 25.53 4.62 28.26 38.12 18.05 (4.33) (55.20) (69.01) (54.50)
Budget Deficit, % of GDP 0.87 1.26 0.08 1.58 0.73 1.14 1.80 2.33 2.25 2.50 2.35 2.41
0.87
1.26
0.08
1.58
0.73
1.14
1.80
2.33
2.25
2.50
2.35
2.41
(0.50)
-
0.50
1.00
1.50
2.00
2.50
3.00
-80
-30
20
70
120
170
220
270
320
370
6
7
Government Budget FY 2016-2017
In trillion IDR
Description (IDR Trillion)
2016 2017
AuditedRealization
Budget R-Budget Outlook∆ R-Budget to
Budget1H Realization
% Realization to Budget
A. Revenues and Grants 1,555.9 1,750.3 1,736.1 1,736.1 (14.2) 718.2 41.0%
I. Domestic Revenue 1,546.9 1,748.9 1,733.0 1,733.0 (15.9) 718.0 41.0%
1. Tax Revenue 1,284.9 1,498.9 1,472.7 1,472.7 (26.2) 571.9 38.2%
2. Non Tax Revenue 262.0 250.0 260.2 260.2 10.2 146.1 58.4%
II. Grants 9.0 1.4 3.1 3.1 1.7 0.2 15.5%
B. Expenditure 1,864.3 2,080.5 2,133.3 2,098.9 52.8 893.3 42.9%
I. Central Government Expenditure 1,154.0 1,315.5 1,367.0 1,343.1 51.5 498.6 37.9%
1. Ministerial Spending 684.2 763.6 773.1 769.2 9.5 263.9 34.6%
2. Non Ministerial Spending 469.8 552.0 593.9 573.9 41.9 234.6 42.5%
II. Transfer to Region and Village Fund 710.3 764.9 766.3 755.9 1.4 394.8 51.6%
1. Regional Transfer 663.6 704.9 706.3 697.7 1.4 360.4 51.1%
2. Village Fund 46.7 60.0 60.0 58.2 - 34.4 7.3%
C. Primary Balance (125.6) (109.0) (178.0) (144.3) (69.0) (68.2) 62.6%
D. Surplus (Deficit) (308.3) (330.2) (397.2) (362.9) (67.0) (175.1) 53.0%
% of GDP (2.49) (2.41) (2.92) (2.67) (0.51) (1.29)
E. Financing 334.9 330.2 397.2 362.9 67.0 209.4 63.4%
I. Debt Financing 403.0 384.7 461.3 427.0
II. Investment Financing (89.08) (47.49) (59.73) (59.73)
III. Loan 1.7 (6.41) (3.67) (3.67)
IV. Guarantee (0.65) (0.92) (1.0) (1.0)
V. Others 19.56 0.3 0.3 0.3
International Bonds Issuance (USD, EUR, JPY-denominated)
Issuance of International Bonds as complement to avoidcrowding out in domestic market consists of USD, YEN orEURO global bonds;
International bond issuance can be maximized up to 25%from gross target, depends on financing need.
Government Debt Securities (SUN): 71 %; Sukuk : 29% ATM for Government Securities (SBN): 6-8 years.
Domestic Issuance
Issuance targets for GDS, Sukuk and ATM target
Weekly Auction: Conventional Securities: 24x Islamic Securities: 24x
Non-Auction: Retail bonds Private Placements: Based on request
InstrumentsIndicative Target (IDR bn)
2017 Budget
Government Securities (Net) 399,993
Redemption 162,842
Cash Management 119,000Buyback 3,000
Government Securities (Gross) 684,835
Composition
Domestic 79%
Auction 93%
Non-Auction 7%
International Bond 21%
8
Government Securities issuance in semester I: • Target: 57.4% from gross issuance target• Realization: 57.7% from gross issuance target
Rupiah Government Securities issuance in semester I:• Target: 42.7% from gross issuance target• Realization: 43.1% from gross issuance target
Front loading issuance for budget financing
Government Securities
Indicative Financing Plan 2017
Securities Financing Realization 2017
(In Million IDR)
*Adjusted with issuance related to cash management realization.
Budget 2017Budget Realization
(as of Aug 1, 2017)
% Realization to
Budget 2017
Government Securities Net 399,992,586 314,321,445 78.58%
Government Securities Maturing in 2017 and Buyback 284,735,024 177,757,300 62.43%
Issuance Need for 2017* 684,727,610 492,078,745 71.86%
Government Debt Securities (GDS) 353,244,478
IDR Denominated GDS 251,223,000
-Coupon GDS 130,880,000
-Conventional T-Bills 119,950,000
-Private Placement 393,000
-Retail Bonds -
International Bonds 102,021,478
-USD GMTN 73,825,500
-Euro GMTN 15,352,390
-Samurai Bonds 12,117,580
-Domestic Foreign Denominated Bonds 726,008
Government Islamic Debt Securities 138,834,267
Domestic Government Islamic Debt Securities 98,865,267
- IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated Bond/Project Based Sukuk) 82,827,957
- Retail Sukuk 14,037,310
- Indonesia Hajj Fund Sukuk 2,000,000
Global Sukuk 39,969,000
9
10
*) Preliminary Figures
Nominal %
a. Foreign Loan (in billion USD) 68.4 63.6 58.4 54.2 54.4 54.0 54.6 19.6%
Bilateral 42.1 37.2 31.5 26.9 24.7 23.2 23.3 8.4%
Multilateral 23.5 23.8 23.7 23.5 26.1 27.5 27.6 9.9%
Commercial 2.8 2.5 3.3 3.8 3.6 3.3 3.2 1.2%
Suppliers 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0%
b Domestic Loan (in billion USD) 0.1 0.19 0.2 0.3 0.3 0.4 0.4 0.1%
c. Government Securities (in billion USD) 131.0 140.8 136.3 155.2 174.7 207.0 223.7 80.3%
Foreign Currency Denominated 21.6 27.4 32.8 36.7 47.8 57.1 59.5 21.3%
Rupiah Denominated 109.4 113.4 103.5 118.5 126.9 149.9 164.2 58.9%
Total Central Government Debt
(in billion USD) 199.5 194.9 209.7 229.4 261.3 278.7
Total Central Government Debt
(in trilion IDR)1,808.9 2,375.5 2,608.8 3,165.1 3,511.0 3,706.5
Exchange Rate Assumption (IDR/USD1) 9,068.0 12,189.0 12,440.0 13,795.0 13,436.0 13,319.0
GDP (in trillion IDR) 7,831.7 9,524.7 10,542.7 11,540.8 12,406.8
Debt to GDP Ratio 23.1% 23.0% 24.9% 24.7% 27.4% 28.3%
Description
June 17
2011 2012 2013 2014 2016*)2015
204.5
1,977.7
9,670.0
8,615.7
Outstanding Central Government Debt By Instrument
11
Sound Government Debt Portfolio
Management
11
140.76 136.27155.24
174.7
206.95223.7
63.7658.61
54.47
54.74
54.37
54.5823.0%
24.9% 24.7%
27.4%28.3% 28.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
50
100
150
200
250
300
2012 2013 2014 2015 2016 June-2017*)
US
D b
n
Securities Loan Gross debt/GDP (%)
Stable Debt to GDP Ratio Over the Years Well Diversified Across Different Currencies
56% 53%57% 55% 58% 59%
24% 29%29% 32%
31% 29%
14% 12%9% 8% 7% 7%3% 3%
3% 3% 4% 4%
3% 3%2% 2% 1% 1%
2012 2013 2014 2015 2016 June-2017
IDR USD JPY EUR Other
Government debt/GDP (%)
*) Using GDP assumption in 2017 Budget
12
Risk Indicators
12
16.2 16.014.8
13.712.3
11.3
22.5 23.2
21.0 20.7
17.819.3
2012 2013 2014 2015 2016*) Jun-17
Variable Rate Ratio (%) Refixing Rate (%)
10.2 11.7 10.7 12.2 11.7 11.0
44.446.7
43.4 44.541.8 40.8
2012 2013 2014 2015 2016*) Jun-17
FX Debt to GDP Ratio (%)** FX Debt to Total Debt Ratio (%)
9.79.6
9.7
9.4
9.08.9
2012 2013 2014 2015 2016*) Jun-17
ATM (in years)
Interest Rate Risk Exchange Rate Risk
Debt Average Time to Maturity Debt Maturing
7.2 8.6 7.7 8.4 6.69.1
21.5 21.8 20.1 21.4 23.0 23.5
32.4 33.4 33.9 34.7 36.539.1
2012 2013 2014 2015 2016*) Jun-17
In < 1 year In < 3 year In < 5 year
*) Preliminary figures **) Using GDP assumption in 2017 Budget
-Risk indicators are improving amidst pressure from rupiah depreciation
-Risk indicators show improvements in interest rate risk and stability in exchange and refinancing risks
Legal Framework ofGovernment Debt Securities
LAW
Law No. 24 Year 2004 concerning Government Debt Securities
GOVERNMENT REGULATIONS
Government Regulations No. 76 Year 2005 concerning Management, Responsibility, and Information Publication of Government Debt Securities Management
REGULATIONS OF FINANCE MINISTER
-- Issuance through auction ---- Issuance through private placement mechanism --
-- Securities buyback ---- Issuance of foreign currency denominated bonds --
-- Issuance of retail bonds --
REGULATIONS OF DIRECTOR GENERAL
-- Administrative requirements and registration for resident ---- Guidance of the use of PDs trading infrastructure --
Regulatory Framework
14
Definition: Government Debt Securities are financial securities in the form of letters of indebtedness from the government, in Rupiah as well as in foreign currencies, which payments of the principal and interests are guaranteed by the Republic of Indonesia, in accordance with validity period thereof.
Types of Government Securities:
• T-Bills: Government Debt Securities with a period of up to and including 12 (twelve)
months, with the interest in the form of a discount.
• Government Bonds: Government Debt Securities with a period of more than 12 (twelve)
months with coupons and/or with the interest in the form of a discount.
The Law Number 24 Year 2002 (1)
15
ObjectiveGovernment Securities shall be issued for the following purposes:
• Financing deficits of the State Budget;
• covering short-term cash shortfall due to the mismatch between the cash flows of
revenues and expenditures in the State Cash Accounts within one fiscal year;
• managing the state debt portfolio;
Authorization to issue Government Securities is embedded and implemented by the Minister of Finance
• Consultation with Central Bank
• Should be approved by the parliament (on a net basis)
The fund for the payment of interests and principal amounts are provided annually in the Budget
Central Bank acts as central registry and Fiscal Agent (payment, clearing and settlement). Central Bank also acts as auction agent.
The Law Number 24 Year 2002 (2)
16
Front Office Operations
Strengthening the Government Debt Securities market by:1. Helping to build stable, dependable source of demand
for securities in the primary market.2. Providing liquidity in the secondary market3. Devoting capital resources for market making (as a
proprietary buyer)4. Building distribution channels5. Providing market information including prices, volumes
and spreads between bids and offer
Primary Dealership
1. To improve the government bond market liquidity
2. To provide a reference yield for private sector issuingcorporate bonds
3. To support the overall yield curve
Establishing Benchmark
Series
Primary Dealership and Establishing
Benchmark Series
18
Government SecuritiesContinuous efforts in providing diversified instruments
Government Securities (GS)*
Government Debt Securities (GDS) Government Sharia Securities (SUKUK)
Government Bonds (GB) Treasury Bills
GB - Foreign CurrencyGB - Domestic USD GB – Rupiah
Samurai Bonds (JPY)
Global Bonds (USD)
Global Bonds (Euro)
Variable Rate (Rp)
Fixed Rate (Rp)
Variable Rate(Regular)
Savings Bond Ritel Retail Bond
Fixed Rate(Regular)
Zero Coupon(Regular)
By Tenor
By Currency
By Coupon Type
Notes: *) GS consist of Tradable and Non Tradable GS
19
• A fixed coupon • First issuance in 1999• Issued through auction• Coupon is paid every 6 months
• Retail obligation, sold through a selling agent.
• Issued through book building• Minimum order IDR5 million• ORI, first issuance in 2006• SBR, first issuance in 2014
• A variable coupon • First issuance in 1999• Issued through auction• Rate determined every 3 months
based on 3 months-T’Bills
• T’Bills (maturity less than 12 months)
• Government issues 12 months & 3 months T’Bills
• Issued through auction• Discount paper• First issuance in 2007
• First issuance in 2007• No coupon payment schedule• Sold at discount price and
nominal will be paid at its maturity time.
• Non tradable securities• First issued in 2009 to local
government
Product Development
20
• Issued in international capital market
• Dominated in US$, first issued in 2004
• Dominated in EUR, first issued in 2014
• Issued in Japan capitalmarket
• Denominated in YenJapan
• First issued in 2009under JBIC guarantee
Product Development (2)
21
• USD Bond issued in domestic market
• First issued in 2013
Auction1
Private Placement2
Book Building3
Method of Issuance
Issuance
22
Auction Mechanism (IDR and USD in
Domestic Market)
23
Private Placement Mechanism
24
SBR/ORI Issuance Plan
Request for Proposal Selling
Agent
Selling Agent Selection Process
Coupon DeterminationMarketing
Allotment & Setelment
Retail Bond Issuance Process - Book
Building Mechanism
25
Debt management program to reduce the refinancing risk, smoothening maturity (redemption) profile, as well as maintaining liquid series.
Exchange of illiquid short dated series, with liquid long dated benchmark.
Debt Switch
Debt management program to stabilize market, debt portfolio management (reducing high coupon and illiquid series), and to reduce refinancing risk (short dated debt securities).
The amount is flexible, as long as the net issuance target is achieved.
Buyback
Objectives
Debt Switch & Buyback
26
DSUN - MoF
MOFiDSMinistry of Finance
Dealing System
Dealer A
Data Offering
Auction results,Determined by MoF
Primary Dealers
1
3
4
5
6
2
Dealer B
Auction Results Announcement
Rules andMonitoring on auction
BI-SSSSv.s.
BI-RTGS
Offering
Tabulation,allocation
RegistrationAuction
7AwardedOffers
PaymentsSecurities delivery (govt bonds)
Settlement
Settlement
8
Settlement
Auction Plan Announcement
1 day before
DSS-MoF
Decision Support System
Debt Switch & Buyback Mechanism
27
Direct transaction is a transaction (buy or sell) of government securities between government and eligible parties (Primary Dealers, Central Bank, Deposit Insurance Corporation), through Dealing Room facility.
Objectives:
• Stabilizing the government securities market.
• Managing the portfolio of government securities.
• Achieving net government securities target.
Direct Transaction
28
Accessing International Capital Market
Directorate General of Debt Management
Raise capital to meet financing needs
Diversify financing sources
Creating a benchmark for valuation of sovereign credit risk and facilitate future issuance by
sovereign, local government, public enterprises
Reduce crowding out effect in domestic bond market
Promote credit story of Indonesia
Objectives:
Global Bond Issuance Strategy:
Volume: less than 30% of total gross issuance target1
Timing: considering financial market condition e.g. interest rate and market liquidity2
Instruments’ composition: based on cost calculation, potential demand, risk management and prioritizing global bond in USD (more than 50%)
3
Currency: USD, EUR, JPY4
Objectives & Strategy
30
Directorate General of Debt Management
Foreign Exchange Riskthe probability to adjust prices and costs to offset changes in exchange rate.
1
Rollover Riskwhen debt is about to mature and needs to be rolled over into new debt. If interest rates rise adversely, countries would have to refinance their debt at a higher rate and incur more interest charges in the future.
2
Risk Entailed
Issuance Format
Benefits:1) High flexibility in global bond issuance since
the time required for the transaction is shorter
2) Issuance costs and documentation arerelatively cheaper than stand alone issuance
3) Effectively achives global distribution including Qualified Institutional Buyers (QIBs at USA)
4) Less onereous documentation requirements
Drawback:1) Less flexibility, since the time required for
the transaction is relatively longer2) Full documentation is required for each
issuance
Global Medium Term Notes Stand Alone Issuance
Risk Entailed and Issuance Format
31
Directorate General of Debt Management
Global Medium Term Note (GMTN) Process
- MoF Decision- Selection Committee- Request For Proposal
and TOR
- Offering circular- Listing requirement- Legal document- Rating confirmation- Due diligence- Road show (optional)
- Technical proposal evaluation- Beauty Contest- Expenses Negotiation- Appointment of Panel,- JLM and LC- Engagement Letter
Preparation Selection Documentation
• Bring down due diligence
• Pricing• Settlement• Listing• Signing• Closing
Execution
Notes:• Total amount of GMTN program: USD 50 billion (up to 2017)• Current balance of GMTN program: USD 9.97 billion
International Bonds
Issuance Process
- Selection Committee- TOR and RfP- Preliminary discussion
with JBIC:• Program Agreement• Draft Indemnity
Agreement• JBIC guarantee fee
- Preparation forUnderlying Transaction
•Private Placement Memorandum•Non Deal road show presentation•Other Legal Documents
- Panel Appointment - Appointment of JLM
& LC- Appointment of CCB
and IPAA- Engagement Letter
Preparation Selection Documentation
• Price Guidance• Bookbuilding• Single spread
and maximum yield• Pricing• Settlement/Closing
Execution
Samurai Bond Process – Private Placement with JBIC Guarantee
32
Notes:• CCB: Commissioned Companies for Bondholders• IPAA: Issuing and Paying Agent and Administrative
Directorate General of Debt Management
- Selection Committee- TOR and RfP
•Securities Registration Statement (SRS)
•Non Deal road show presentation•Other Legal Documents
- Panel Appointment - Appointment of JLM& LC
- Appointment of IPAA (Fiscal Agent)
- Engagement Letter
Preparation Selection Documentation
• Price Guidance• Bookbuilding• Single spread
and maximum yield• Pricing• Settlement/Closing
Execution
Samurai Bond Process – Public Offering
International Bonds
Issuance Process
- Selection Committee- TOR and RfP
•Private Placement Memorandum•Non Deal road show presentation•Other Legal Documents
- Panel Appointment - Appointment of JLM & LC-Appointment of IPAA
(Fiscal Agent)- Engagement Letter
Preparation Selection Documentation
• Price Guidance• Bookbuilding• Single spread
and maximum yield• Pricing• Settlement/Closing
Execution
Samurai Bond Process – Private Placement without JBIC Guarantee
33
Provide economic data and information on economic policies, either directly or through a website.1
Explain the context behind data releases and, therefore, actively shape investor sentiment in line with fundamentals.
2
Correct inaccurate information and dispel false rumors.3
Supply information on international and domestic government securities.4
Provide answers to questions of both retail and institutional investors either directly or through e-mail.
5
Directorate General of Debt Management
The role of investor relations programs:
The programs include:
Non Deal Road show
Investor Teleconference
Investor Mailing List
Information/Data Dissemination through website
Serve as a sounding board for sovereign financing operations.6
Help policymakers interpret evolving market techniques, practices, and sentiment.7
Investor Relations Programs
34
Directorate General of Debt Management
Credit rating is measurement of willingness and ability of debitor to service its obligations.
Credit ratings allow the issuer to tap a wide investor base as most fund managers are required to invest only in rated securities.
The role of credit ratings:
• To overcome the asymmetry of information or lack of familiarity with a given country.
• To indicate that a country’s investment climate, creditworthiness, and capacity to service
existing debt.
• To provide an independent mechanism to validate and encourage the pursuit of
appropriate macroeconomic policies and the government’s commitment to the adoption
of market-friendly economic reform.
• To promote good governance and foster transparency in government decision-making
and in the collection and dissemination of information.
• To promote investments by institutional and retail investors in mature markets
The Need for Credit Rating
35
Directorate General of Debt Management
Credit Rating Improvement
36
(RHS)
Primary Market Performance 2017:
Global Bonds (USD)
Issuer RI0122 RI0127 RI0147
Issuer Republic of Indonesia
Issuer Rating Baa3 (Moody’s) / BBB- (Fitch)
Issue Rating Baa3 (Moody’s) / BBB- (Fitch)
Issue USD Fixed Rate USD Fixed Rate USD Fixed rate
Size USD$0.75bn USD$1.25bn USD$1.50bn
Pricing/Settlement Date
December 1, 2016 / December 8, 2016
Maturity January 8, 2022 January 8, 2027 January 8, 2047
Coupon 3.700% 4.350% 5.250%
Re-offer Yield/Price 3.750%/
99.767%
4.400%/
99.592%
5.300%/
99.246%
Format Rule 144 A / Reg S
Listing SGX-ST and Frankfurt Stock Exchange
Total Book Order USD5.20bn USD3.50bn USD3.30bn
34
74%
12%
5%0
9%
RI0122
Asset Managers/ Fund ManagerBankCentral Bank/Sovereign FundsInsurance/ Pension FundsPrivate Banks
53%
22%
5%
18%2%
RI0127
Asset Managers/ Fund ManagerBankCentral Bank/Sovereign FundsInsurance/ Pension FundsPrivate Banks
27%
2%6%62%
3%
RI0147
Asset Managers/ Fund ManagerBankCentral Bank/Sovereign FundsInsurance/ Pension FundsPrivate Banks
Allocation by Geography
Allocation by Investor Type
Primary Market Performance 2017
Global Bonds (USD)
3%
22%
27%
48%
RI0122
Indonesia Asia (Ex. Indonesia) Europe USA
18%
26%
18%
38%
RI0127
Indonesia Asia (Ex. Indonesia) Europe USA
1%
58%12%
29%
RI0147
Indonesia Asia (Ex. Indonesia) Europe USA
35
Primary Market Performance 2017:
Samurai Bonds (JPY)
Issuer Republic of Indonesia
Issuer Rating Baa3 (Moody’s) / BBB- (S&P) / BBB- (Fitch) / BBB- (R&I) / BBB- (JCR)
Format Samurai Bonds
Type of Notes Senior Unsecured
Bond Rating Baa3 (Moody’s) / BBB- (Fitch) / BBB- (R&I)
Pricing Date May 31, 2017
Settlement Date June 8, 2017
Total Issue amount JPY 100bn
Series #1 #2 #3
Tenor 3yr FIX 5yr FIX 7yr FIX
Trance Size JPY 40bn JPY 50bn JPY 10bn
Coupon 0.65% 0.89% 1.04%
Re-offer Spread +55bps +75bps +85bps
39
Primary Market Performance 2017:
Samurai Bonds (JPY)Allocation by Geography
Allocation by Investor Type
25.0%
11.3%
2.0%15.8%
9.3%
4.0%
6.8%
26.0%
RIJPY0620
City Banks Trust Banks Specialized BanksLife Insurance Asset Managers Regional BanksShinkins Others
18.0%
24.6%
23.4%
8.8%
1.8%
23.4%
RIJPY0622
Trust Banks Life Insurance Asset Managers
Regional Banks Shinkins Others
20.0%
8.0%
5.0%
15.0%
52.0%
RIJPY0624
Life Insurance Asset Managers Regional Banks
Shinkins Others
100%
RIJPY0620
Asia
100%
RIJPY0622
Asia
100%
RIJPY0624
Asia
40
Primary Market Performance 2017:
Dual Currency (EUR & USD)
Issuer RIEUR0724 RI0727 RI0747
Issuer Republic of Indonesia
Issuer Rating Baa3 (Moody’s) / BBB- (Fitch)
Issue Rating Baa3 (Moody’s) / BBB- (Fitch)
Issue EUR Fixed Rate USD Fixed Rate USD Fixed rate
Size EUR€1.00bn USD$1.00bn USD$1.00bn
Pricing/Settlement Date
July 11, 2017 / July 18, 2017
Maturity July 18, 2024 July 18, 2027 July18, 2047
Coupon 2.150% 3.850% 4.750%
Re-offer Yield/Price 2.178%/
99.820%
3.900%/
99.589%
4.800%/
99.209%
Re-offer Spread +158bps - -
Format Rule 144 A / Reg S
Listing SGX-ST and Frankfurt Open Market
Total Book Order EUR4,3bn USD4.1bn USD3.2bn41
42
Primary Market Performance 2017:
Dual Currency (EUR & USD)Allocation by Geography
Allocation by Investor Type
55%
11%
6%
28%
RI0747
Fund/Asset Managers Bank/ Private Banks
Central Bank/Sovereign Funds Insurance/ Pension Funds
52%
17%
14%
17%
RIEUR0724
Fund/Asset Managers Bank/ Private Banks
Central Bank/Sovereign Funds Insurance/ Pension Funds
56%27%
10%7%
RI0727
Fund/Asset Managers Bank/ Private Banks
Central Bank/Sovereign Funds Insurance/ Pension Funds
10%
17%
16%
13%
8%
7%
5%
13%
11%
RIEUR0724
Indonesia Asia (Ex. Indonesia) Inggris Raya
Jerman Swiss Itali
Perancis Eropa lainnya USA
2.5%
35.5%
24%
38%
RI0747
Indonesia Asia (Ex. Indonesia) Europe USA
15%
25%
22%
38%
RI0727
Indonesia Asia (Ex. Indonesia) Europe USA
42
Developing Government Securities
DEEP, ACTIVE, AND LIQUID MARKET
Sufficient market capacity to absorb and efficient price/yield
REGULATION, SUPERVISION, INSTITUTIONAL SUPPORT, AND MARKET
COMMUNICATION
PRIMARY MARKET
• Activities: Regular issuance (auction, book building), private placement
• Infrastructure: Auction system for domestic and global issuance, settlement
system for retail bonds
SECONDARY MARKET
• Activities: Buyback, debt switch, securities lending facility
• Infrastructure:
- Primary dealers quotation system
- Trading system through IDX
- INDOBeX
- Electronic Trading Platform (ETP): for retail bonds (under development)
• Price Discovery Mechanism:
- IBPA (Indonesia Bond Pricing Agency)
- PLTE (Penerima Laporan Transaksi Efek)
- Yield curve for benchmark series.
• Repo Instruments and Derivatives: MRA, GMRA & Indonesia Government
Bond Futures
MARKET INFRASTRUCTUREDEMAND SUPPLY
Banks
Central Banks
Foreign Investors
Insurance
Pension Funds
Mutual Funds
Corporates
Securities Houses
Retail Investors
LPS (Indonesia Deposit
Insurance Corporation)
BLU (Public Service
Agency)
SOE (State Owned
Enterprise)
Others
GOVERNMENT
BOND:
Local Currency
Bonds
Foreign Currency
Denominated Bonds
TREASURY BILLS
Government Securities Market
Development Framework
44
PRICE DISCOVERY MECHANISM
Centralised transaction report through PLTE
Yield curve for benchmark series and all tenors
Establishment of IBPA (Indonesia Bond Pricing Agency)
UNDER DEVELOPMENT
ETP (Electronic Trading Platform) for secondary market
Developing IGBF (Indonesia Government Bond Futures)
MARKET MECHANISM
Establishment of primary dealers system for govt debt securities & PDs
quotation system
Development of INDOBeX (Indonesia Government Bond Index)
Debt switch through many-to-many and staple bonds mechanism
GMRA as a standard master agreement for repo transactions
Implementation of SID (Single Investor Identification)
Establishment of BI-SSSS
Establishment of MoFIDs
BI-SSSS= Bank Indonesia – Scripless Securities Settlement SystemMoFIDS = Ministry of Finance Dealing System
Improving market infrastructure
45
FINANCIAL MARKET
STABILISATION
Ministry of Finance
Bank Indonesia
Indonesia Financial Services
Authority (OJK)
Indonesia Deposit
Insurance Corporation
(LPS)
FINANCIAL MARKET
DEVELOPMENT
Ministry of Finance
Bank Indonesia
Indonesia Financial Services
Authority (OJK)
Coordination among Authorities
46
47
1.97 1.89
1.11
1.73 1.74
1.94
2.60
2.14
1.39
1.58 1.75
4.72
2.44
1.93 2.01
2.62
2.38
1.31
1.83
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
-
20
40
60
80
100
120
140
160
Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS)
Average awarded bids
2017= IDR16.7T/auction
Average incoming bids
2017 = IDR36.7T/auction
Average Incoming Bid 2016 = IDR25.55T while Average Awarded Bid 2016 = IDR13.37T
“as of Aug 2, 2017”
*) Surat Utang Negara (SUN)
[In Trillion IDR ]
GDS* PRIMARY MARKET PERFORMANCE
2017 - Auction
47
Average awarded bids
2016= IDR13.37T/auction
Average incoming bids
2016 = IDR25.55T/auction
GS Maturity Profile S-1 2017
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2040 2041 2042 2043 2044 2045 2046 2047
TOTAL 142 192 204 124 169 154 120 199 106 160 116 72.6 93.4 25.7 93.3 64.3 48.2 92.4 21.3 84.3 39.8 42.3 0 7.53 7.53 17.2 43.4 29.9 54.8 26.6 16.6 20
SUKUK USD 0 13.3 20 0 0 13.3 0 20 26.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
SUKUK IDR 48 33.3 31.5 38.8 0 1.22 0 0 1.55 0 3.79 0 0 2.18 0 0 0 0 0 4.11 10.1 0 0 7.53 7.53 0 0 9.93 0 0 0 0
SUN JPY 0 2.7 11.6 14.7 4.56 13.3 0 1.21 6.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
SUN EUR 0 0 0 0.74 14.9 0 22.3 0 18.6 0 0 22.3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
SUN USD 13.3 25.3 26.6 26.6 33.3 36.6 33.3 26.6 26.6 36 16.6 0 0 0 0 0 0 0 21.3 0 20 26.6 0 0 0 0 30 20 26.6 26.6 16.6 20
SUN IDR 80.9 118 114 43.1 116 89.6 64.4 151 26 124 95.7 50.3 93.4 23.5 93.3 64.3 48.2 92.4 0 80.2 9.63 15.7 0 0 0 17.2 13.4 0 28.2 0 0 0
0
20
40
60
80
100
120
140
160
180
200
220
48
[In Trillion IDR ]
49
GDS Secondary Market Performance
2
4
6
8
10
12
14
16
18
20
22
Aug'1
1
Nov'1
1
Feb'1
2
May'1
2
Aug'1
2
Nov'1
2
Feb'1
3
May'1
3
Aug'1
3
Nov'1
3
Feb'1
4
May'1
4
Aug'1
4
Nov'1
4
Feb'1
5
May'1
5
Aug'1
5
Nov'1
5
Feb'1
6
May'1
6
Aug'1
6
Nov'1
6
Feb'1
7
May'1
7
Aug'1
7
5Y 10Y 15Y 20Y
6.68 (5Y), 6.88 (10Y), 7.33 (15Y), 7.56 (20Y)
(%)Average Daily TradingYield of Benchmark Series
Quotation of Benchmark Series (ao Aug 1, 2017) Foreign Ownership V. 10Y Yield Movement
Source: IBPA
As of Aug 1, 2017
5.88 5.73 5.31 7.91 9.38 9.54
12.36 9.20
11.40 0.16 0.38 0.25
0.76 0.72 0.61
0.82
0.41
0.75
1.54 3.07
6.46
8.80
10.15
15.50
15.84
15.59
15.34
-
10.00
20.00
30.00
40.00
2011 2012 2013 2014 2015 2016 Mar-17 Jun-17 Jul-17
OUTRIGHT REPO BANK REPO BIAs of Aug 1, 2017
A DAY
BEFORE
5 DAYS
BEFOREMTD YTD
FR0061 PRICE 101.28 101.13 100.99 101.13 97.96 15 29 15 332
5Y YIELD 6.68% 6.72% 6.75% 6.72% 7.47% (4) (7) (4) (79)
FR0059 PRICE 100.80 100.48 100.60 100.48 94.98 32 20 32 582
10Y YIELD 6.88% 6.93% 6.91% 6.93% 7.71% (5) (3) (5) (83)
FR0074 PRICE 101.50 101.26 101.75 101.26 101.18 24 (25) 24 32
15Y YIELD 7.33% 7.36% 7.31% 7.36% 8.13% (3) 2 (3) (80)
FR0072 PRICE 106.88 106.26 106.96 106.26 97.19 62 (8) 62 969
20Y YIELD 7.56% 7.62% 7.55% 7.62% 7.81% (6) 1 (6) (25)
CHANGES (bps)YEAR TO
DATE
PRICE/
YIELD
SERIES/
TENOR
MONTH TO
DATE
A DAY
BEFORETODAY
5 DAYS
BEFORE
[In IDR ]
50
Ownership of Tradable Domestic
Government Securities(in trillion IDR)
1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company, and Pension Fund.
2) Others such as Securities Company, Corporation, and Foundation.
*) Including the Government Securities used in monetary operation with Bank Indonesia.
**) net, excluding Government Securities used in monetary operation with Banks.
Description
Banks* 375.55 30.98% 350.07 23.95% 399.46 22.53% 493.82 27.27% 399.19 20.45% 550.79 27.95%
Govt Institutions (Bank Indonesia**) 41.63 3.43% 148.91 10.19% 134.25 7.57% 53.31 2.94% 175.89 9.01% 32.59 1.65%
Bank Indonesia (gross) 157.88 8.90% 163.63 9.03% 180.28 9.23% 180.25 9.15%
GS used for Monetary Operation 23.63 1.33% 110.32 6.09% 4.39 0.22% 147.66 7.49%
Non-Banks 795.17 65.59% 962.86 65.87% 1239.57 69.90% 1264.02 69.79% 1377.15 70.54% 1387.53 70.40%
Mutual Funds 45.79 3.78% 61.60 4.21% 85.66 4.83% 87.84 4.85% 91.56 4.69% 91.80 4.66%
Insurance Company 150.60 12.42% 171.62 11.74% 238.24 13.43% 241.25 13.32% 254.21 13.02% 257.31 13.06%
Foreign Holders 461.35 38.05% 558.52 38.21% 665.81 37.55% 685.51 37.85% 770.55 39.47% 776.24 39.38%
Foreign Govt's&Central Banks 103.41 8.53% 110.32 7.55% 120.84 6.81% 118.91 6.57% 131.94 6.76% 132.92 6.74%
Pension Fund 43.30 3.57% 49.83 3.41% 87.28 4.92% 86.95 4.80% 89.11 4.56% 89.85 4.56%
Individual 32.80 2.71% 42.53 2.91% 57.75 3.26% 57.69 3.19% 60.49 3.10% 60.02 3.05%
Others 61.32 5.06% 78.50 5.37% 104.84 5.91% 104.78 5.79% 111.23 5.70% 112.31 5.70%
Total 1,212.35 100% 1,461.85 100% 1,773.28 100% 1,811.14 100% 1,952.23 100.00% 1,970.91 100.00%
01-Aug-17Jun-17Dec-16 Jan-17Dec-15Dec-14
Yield of Govt Bonds on Peers’ Market
• Market Watch as of August 2, 2017• Source: Asian Bonds Online
Source: IDMA, Bloomberg, as of Nov. 22 2016
LCY 10 Year Government
Bonds
Latest Yield(%)
YTD Change (BP)
MTD Change
(BP)
HK 1.542 -43.2 +2.4
ID 6.925 -104.8 -2.6
JP 0.078 +3.2 -0.5
KR 2.260 +16.8 +3.3
MY 3.988 -24.0 -0.5
PH 4.989 +36.1 +31.5
SG 2.130 -34.4 +3.4
TH 2.413 -23.5 -1.8
US 2.253 -19.1 -4.1
VN 5.456 -91.9 +1.0 -
2
4
6
8
10
12
14
16
18
20
22
1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y
1 Aug '17 25 Jul '17 3 Jul '17 9 Feb '12
22 Sep '11 27 Oct '08 13 Sep'05
[in percentage]
51
Crisis Management Protocol &Bond Stabilization Framework
Pre-emptive Measures
Implementing Crisis Management Protocol (CMP)
Implementing Bond Stabilization Framework (BSF)
Enhancing coordination between government institutions and continuous dialogue with market participants
Specific policies in place to address crises enacted in 2015 budget law
Swap facility arrangements based on international cooperation
Crisis Management Protocol Indicators to determine crisis level of
Government Securities Market condition (normal, aware, alert, crisis)
Several market indicators that are monitored daily:
- Yield of benchmark series;- Exchange rate;- Jakarta Composite Index;- Foreign ownership in government securities
Policies to address the crisis at every level :
- Repurchase the government securities at secondary market- Postpone or stop the issuance
First Line of Defense
State’s Budget
Buyback fund at DG of Budget Financing and Risk Management
Investment fund at Public Service Agency (BLU) (min. level Aware)
State Owned Enterprises (BUMN)’s Budget
Related BUMNs (min. level Aware)
Social Security Organizing Agency (BPJS)’s Budget
BPJS (min. level Aware)
Second Line of Defense
State’s Budget
State General Treasury Account (Rekening KUN) (min. level Alert)
Accumulated cash surplus (SAL) (min. Level Crisis)
State Owned Enterprises (BUMN)’s Budget
Related BUMNs (min. level Alert)
Social Security Organizing Agency (BPJS)’s Budget
BPJS (min. level Alert)
Bond Stabilization Framework
Implement Measures to Manage
External Volatility
53
14.67 15.95
13.17 12.49
21.34
(19.84)
39.48
6.84
(3.59)
4.10 6.31
23.04
(3.90)
(7.96)
(2.30)
5.39
8.38
21.37 19.80
9.46
18.30 20.09
(4.21)
22.03
15.04
9.06
16.89
(9.35)
(19.58)
9.75
19.70
6.38
31.33
22.59
10.33
14.40
(0.41)
(7.60)
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
(30.00)
(20.00)
(10.00)
0.00
10.00
20.00
30.00
40.00
50.00
Ju
l-1
4
Se
p-1
4
No
v-1
4
Ja
n-1
5
Ma
r-1
5
Ma
y-1
5
Ju
l-1
5
Se
p-1
5
No
v-1
5
Ja
n-1
6
Ma
r-1
6
Ma
y-1
6
Ju
l-1
6
Se
p-1
6
No
v-1
6
Ja
n-1
7
Ma
r-1
7
Ma
y-1
7
Ju
l-1
7
Net Inflows [LHS] Net Inflows Over Total Foreign Holdings [RHS]
Monthly Net Buyer (Seller) - Non Resident Foreign Ownership - Proportion by Tenor
[In Trillion IDR ]
54
As of July 17, 2017
5.2% 4.6% 3.2% 3.5% 3.4% 5.4% 4.4%
5.4% 3.7%
1.3%5.3%
2.0%5.1% 5.2%
12.9% 15.2%
11.8%
17.8%17.8%
17.4% 18.2%
32.0% 33.6%
39.0%
37.4%38.0%
35.9% 36.2%
44.5% 42.8% 44.7%
36.0%38.8% 36.2% 36.0%
32.5%
38.1% 38.2% 37.5% 37.8%39.5% 39.1%
0%
20%
40%
60%
80%
100%
Dec 13 Dec 14 Dec-15 Dec-16 Jan-17 Jun-17 17-Jul-17
0-1 ≥1-2 ≥2-5 ≥5-10 ≥10 %Foreign Ownership of Total
Foreign Investor ActivityDominated By High Quality Long Term Investors
FSA (OJK) Regulation No 1/POJK.05/2016*on Investment in Government Securities for Non-Bank Financial Institution
Life Insurance Company
Min. 20% of total investment ( by Dec. 31 2016).
Min 30% of total investment ( by Dec. 31 2017).
General Insurance, Reinsurance & Guarantee
Company
Min. 10% of total investment ( by Dec. 31 2016).
Min. 20% of total investment ( by Dec. 31 2017).
Employer Pension Fund
Min. 20% of total investment ( by
Dec. 31 2016)
Min 30% of total investment ( by Dec. 31 2017).
BPJS Ketenagakerjaan(The Social Security
Administration Body for Employment)
Min. 50% of total investment of
Employment Social Security Fund (by
Dec. 31 2016).
Min. 30% of total portfolio
investment of BPJS Ketenagakerjaan(by Dec. 31 2016)
BPJS Kesehatan (Healthcare Social Security Agency)
Min. 30% of total investment of BPJS Kesehatan (by Dec.
31 2016).
55
*Since November 14, 2016 this regulation is revised to be FSA (OJK) Regulation No.36/POJK.05/2016 . The revised regulation has added SOE infrastructure bonds as instrument other than Gov’t Securities that can be utilized to fulfill the minimum investment requirement.
Domestic Institutional Investors
63.17
18.63
15.81
97.17
21.02
6.52
12.12
17.44
26.94
7.78
24.06
107.29
66.62
37.45
15.22
26.08
- 20 40 60 80 100 120
Banks*
Bank Indonesia**
Mutual Fund
Foreign Holders
Insurance Company
Pension Fund
Individual
Others
IDR tn
NET BUY 2016 NET BUY 2015
Domestic Investor ActivityIncreasing Demand From Non-bank Institutional
How to mitigate risk resulted from high foreign participation in the domestic market
How to improve liquidity of govt securities:
Benchmark; Non-benchmark series; and 3M SPN (Treasury Bills)
How to increase repo transactions among market players
Challenges
57
END OF PRESENTATION
Directorate General of Budget Financing and Risk ManagementMinistry of Finance of Republic of Indonesia
Directorate of Government Debt SecuritiesFrans Seda building, 4th floor,Jl. Wahidin Raya No. 1, Jakarta Pusat – Postal Code: 10710Phone: +6221 3810175Fax. : +6221 3846516Site: www.djppr.kemenkeu.go.id
To supportmarket
development
To enhance public accountability as part
of transparent Government debt
management
To meet financing needs at
optimum cost and tolerable
riskGeneral Policy
To manage debt-to-
GDP ratio To increase
debtmanagement
efficiency
Tooptimizecurrency
mix of issuance
To achieveoptimal
participation of society
To conductactive debtportfolio
To directdebt use toproductiveactivities
To optimizethe use of
external and domestic
loans
Tostrengthen
the functionof Investor Relations
Unit
Financing Strategy 2017
General Objective & Policy
59
In February 2017, Moody’s changed its outlook on Indonesia to positive (Baa3). The positive outlook reflects their view of:
Improved policy effectiveness (as evidenced by positive improvements in institutions, track record of macrostability and fiscal stability)
Expected reduction in vulnerability to external shocks due to narrowing current account deficits and a slower growth in private sector external debt
In May 2017, S&P upgraded Indonesia’s long-term sovereign credit ratings to an investment grade rating of ‘BBB-’ with stable outlook, from ‘BB+’. This reflects:
Reduced risks to Indonesia’s fiscal metrics
More realistic revenue targets
Effective expenditure management
Increased predicability of economic and financial policy
S&P stated that long-term ratings could be raised if there are significant improvements in the external and fiscal balance
In July 19, 2017, Fitch affirmsIndonesia ast BBB- with outlook Positive. The positive rating reflects:
Al low government debt burden
Strong macroeconomic policy with focus on macro stability and sustainable growth
Further increase in foreign exchange buffers
Improving business environment
Ease of Doing Business1
International acknowledgement from various agencies and improving global perception
1. Source: World Bank.
Integrated Reforms to Bolster Growth
91
130
123
98
69
50
60
70
80
90
100
110
120
130
140
150
2008 2009 2010 2011 2012 2013 2014 2015 2016
Indonesia India Brazil Philippines Turkey
Lower rank is better
Continuous Improvement in Indonesia’s Credit Quality
60