Justice Department probes banks for rigging Treasuries market

 

The Department of Justice is looking into possible manipulation of the $12.5 trillion Treasuries market, The Post has learned.

Justice lawyers, believed to be in the early stages of a probe, have reached out in recent months to at least three of the 22 banks that act as primary government debt dealers and requested information regarding auctions of Treasury debt, said one person close to one of the banks that received the request.

No single bank has become the focus of the probe, it is believed, and no bank has been accused of any wrongdoing. In addition, there is no guarantee that the requests for information will turn up any evidence of manipulating Treasury auctions.

A spokesman for the DOJ on Sunday declined comment on the matter.

The requests for information came as Justice was set to wrap up a probe into manipulation of foreign currency rates.

Last month, five banks pleaded guilty and paid a total of $5 billion in fines to settle a Justice probe into rigging Libor rates.

Treasuries are a bedrock of the US financial system. Their sale raises money to fund the US government and the rate attached to their sale affects a range of borrowing costs — including home mortgages, auto loans, credit cards and corporate bonds.

Last year, the Treasury Department issued some $7 trillion in debt.

They are considered the most easily traded and trusted debt in the world. Treasuries are sold through regular auctions, and include bills, notes and bonds with maturities ranging from a few weeks to 30 years.

After Treasury announces a debt sale, institutional investors place two kinds of bids — competitive, which can get as much as 35 percent of the issuance, or non-competitive, which get a maximum of $5 million.

The banks’ competitive bids, submitted in secret ballots, detail how much they’re willing to pay for the debt. Only some of the bids are ever made public.

A higher price for the debt — and thus, lower interest rate — signals strong demand. By contrast, lower bids and lower debt sale prices mean higher interest rates — an expense that’s ultimately borne by taxpayers.

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