September 9, 2015 / 12:32 PM / 4 years ago

New York seeks info from banks in Treasury auction probe: source

(Reuters) - A New York state regulator has sought information from banks including Barclays Plc, Deutsche Bank AG, Goldman Sachs Group Inc, Societe Generale, and Credit Suisse Group AG on potential manipulation of U.S. Treasury auctions, according to a person familiar with the matter.

The New York 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.

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. (on.ft.com/1JSDKww)

It was not clear exactly what activity in the Treasury market the regulator is investigating.

All the banks are primary dealers in the $12.5 trillion Treasury market, authorized to transact directly with the Federal Reserve.

In June, the U.S. Department of Justice also was reported to be looking into the Treasury market.

The Justice Department, New York Department of Financial Services and representatives of the banks declined to comment on Wednesday.

In July, 22 primary dealers including major banks were sued by the State-Boston Retirement System, the pension fund for Boston public employees, in a U.S. 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 Holdings Plc, JPMorgan Chase & Co and UBS AG were among the banks that were sued.

The activities of a lesser-known hedge fund, Element Capital Management LLC, have caught the attention of the Treasury Department, the Wall Street Journal reported on Tuesday. (on.wsj.com/1LUZsTi)

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.

“Consistent with our policy, Treasury does not comment on individual investors in Treasury auctions or conversations with market participants,” Treasury spokesman Adam Hodge said on Wednesday.

Reporting by Karen Freifeld in New York and Rachel Chitra in Bengaluru; Editing by Kirti Pandey and Lisa

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