BackUS regulator seeks information from banks in treasury auction probe
The regulator sent letters to banks in early August, seeking information on their operations related to treasury auctions
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New York/Bengaluru: A New York state regulator has sought information from banks including Barclays, Deutsche Bank, Goldman Sachs and Credit Suisse on potential manipulation of US treasury auctions, said a person familiar with the matter.
The department of financial services sent letters to the banks in early August, seeking information on their operations related to treasury auctions, the person said, adding that the letters do not necessarily indicate wrongdoing by the banks.
BNP Paribas and Societe Generale are also among the banks that received the letters, the person said.
The Financial Times, citing sources, reported that the letters contained general questions and that the probe was in early stages with no focus on any particular bank.
Reuters could not immediately ascertain the nature of the activity in the treasury market that the regulator was looking into.
US department of justice spokesman Peter Carr and representatives of five of the banks declined to comment, while BNP Paribas was not immediately available for comment.
All the banks are primary dealers in the $12.5 trillion treasury market, authorized to transact directly with the Federal Reserve.
On 22 July, primary dealers including major banks were sued by the State-Boston Retirement System, the pension fund for Boston public employees, in a US federal court in a nationwide class action suit alleging a conspiracy to manipulate treasury auctions.
Credit Suisse, Deutsche Bank, Goldman Sachs, Bank of America Corp’s Merrill Lynch unit, Citigroup Inc, HSBC , JPMorgan Chase & Co and UBS were among the banks that were sued.
The activities of a lesser-known hedge fund, Element Capital Management LLC, have also been under scrutiny from the treasury department, the Wall Street Journal reported on Tuesday.
The fund has been the largest bidder in nearly all of the 62 treasury note and bond auctions in November-July, many of which involved sales of over $30 billion of debt, the Journal reported, citing people familiar with the matter.
Element’s activity has raised questions because its cumulative purchases far exceed its $6 billion in assets under management, the Journal said.
Large trades by hedge funds, although not illegal, cause unnatural volatility in the treasury market and potentially increase borrowing costs. Reuters
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