UPDATE 2-U.S. regulator reviews bond futures spike ahead of jobs data

Fri Aug 2, 2013 4:06pm EDT

By Karen Brettell and Ann Saphir

NEW YORK/SAN FRANCISCO Aug 2 (Reuters) - U.S. futures regulators are looking into a spike in Treasury futures trades just seconds ahead of a highly anticipated U.S. jobs report, triggering a brief halt at CME Group Inc on Friday.

CME halted trading in 10-year and 30-year Treasury futures for five seconds, disrupting one of the world's biggest marketplaces where investors bet on and hedge against market swings.

"We are aware of it and will be doing a review of the trades, which is standard operating procedure for something like this," Commodity Futures Trading Commission commissioner Bart Chilton said in response to a query from Reuters about CME's trading halt.

Some 198,000 10-year Treasury futures, with a notional value of $19.8 billion, traded in the minute before the release, according to data compiled by Thomson Reuters.

That's 14 percent of the volume traded in the contract over the entire prior day's session, CME Group data show. Trading is often volatile and heavy around U.S. government jobs reports.

Prices shot up just before CME's trading halt, rising 20/32 of a point to 125 29/32 in a period of seven seconds. Other related markets saw prices jump sharply as well, including 30-year Treasury futures and even contracts tied to German government bonds.

CME spokesman Michael Shore said that the firm had "stop logic events" in the 10- and 30-year Treasuries futures contracts at 8:29:57 a.m. EDT, three seconds before the employment report was released.

Trading in futures resumed two seconds after the report, which showed U.S. employers added fewer jobs than expected in July. Bond prices, including Treasury futures prices, rose, sending yields down sharply as investors lost confidence the Fed could soon begin trimming its massive bond-buying stimulus program. [ID: nL1N0G30CR]

CME's stop-logic programming is an automated system that shuts off trading for a set period in response to extreme market swings.

A CME spokeswoman had no immediate further information about the incident or the exchange operator's response.