A US probe into the alleged rigging of the US$13 trillion market for US government bonds, or Treasuries, by Wall Street banks has narrowed its focus to a few firms - including Goldman Sachs, The New York Post reported on Sunday (March 20).
It said, quoting unnamed sources, that European authorities have opened up their own investigation into the possible Treasury bid-rigging.
The Post said investigators in the fraud division of the Justice Department have obtained chats and e-mails from Goldman that appear to implicate the company in manipulating the price of Treasury bonds, one of the biggest traded asset classes in the world.
The Post had first reported the Justice Department probe in June last year. In November, Goldman disclosed in a regulatory document that it was being probed for possible manipulation of US government bond prices, said the Post.
The newspaper said Goldman is one of about 22 financial institutions that have been probed for any evidence that they may have manipulated Treasury auctions - a secretive process where banks and other financial services companies bid on the price of US government debt.
US authorities are also looking into whether there was price-rigging in the secondary market for Treasuries, where the bonds are sold at a premium, the Post added.
The newspaper noted that it was unclear if investigators had found any improprieties or illegal action.
It said that traders are thought to have rigged the market in two possible ways: by agreeing beforehand to keep bond prices higher than normal in order to boost profits in other positions that depend on higher rates, akin to how traders rigged the London-based Libor rate.
They could have also have colluded to keep prices lower than normal to sell them at a higher price - and score a bigger spread - to their clients, who agreed to pay a fixed amount beforehand.