Deutsche eyed in Treasury rigging probe

May 31, 2016 at 09:50

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Investigators probing the $13 trillion market for US Treasurys are zeroing in on a second Wall Street bank, The Post has learned.

Deutsche Bank, led by co-CEO John Cryan, has emerged as a focus of the probe into whether traders rigged auctions for government debt, according to sources.

No bank has been accused of wrongdoing, but investigators are narrowing their focus after requesting documents and communications from all of the 22 primary dealers in Treasurys.

That group includes the biggest Wall Street banks and their counterparts in Europe and Asia.

Goldman Sachs, led by Chief Executive Lloyd Blankfein, revealed in a regulatory filing in November that regulators were looking into its role in government debt auctions.

“Deutsche Bank is cooperating with the industry-wide investigations into the auction market,” Amanda Williams, a bank spokeswoman, told The Post. “Based on our review to date, we have no reason to believe we are the focal point of any investigation into this market.”

The Department of Justice launched an investigation roughly a year ago into whether the big banks had conspired to rig the Treasury market.

No settlement talks are expected to take place until after the election in November, according to sources.

After The Post broke the news of the DOJ probe last June, three dozen investors, including pension funds and endowments, filed suit against the banks for alleged price manipulation in Treasurys. The suits have since been consolidated in Manhattan federal court.

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Justice Department probes banks for rigging Treasuries market
Justice Department probes banks for rigging Treasuries market
The DOJ isn’t the only one digging through trading documents, e-mails and chats.

The Securities and Exchange Commission, New York’s Department of Financial Services and the Commodity Futures Trading Commission, as well as the European Commission, are also probing possible rigging of the Treasury market.

The widespread probe puts the spotlight on the Treasury’s secretive auction process, in particular “when-issued” trading. These are bonds that are pre-sold to buyers by the banks — essentially allowing traders to place bets on interest rates for Treasurys that will be issued at the government auction a week later.

The DOJ is further along with its probe of Goldman’s activities, and the bank has been cooperating with investigators, sources said.

“They’re meeting with the government on a regular basis,” one source said.

More recently, investigators turned their attention to Deutsche, the German banking giant.

The Treasury probe comes as Wall Street banks are still paying hundreds of millions of dollars in fines for rigging key interest rates.

Regulators are also scrutinizing manipulation of gold, silver and derivatives prices, sources said.

This isn’t Deutsche’s first time on the wrong end of a rigging probe.

Earlier this year, the bank settled a suit over fixing gold and silver prices for undisclosed terms. Last year, it paid $2.5 billion to settle allegations that it rigged Libor, a key interest rate used to price debt around the globe.