Tuesday, November 07, 2006

Treasury Dealers Get an Earful From the Fed

Trading in Treasury bonds may not be the most glamorous corner of Wall Street. But it has gotten the attention of the New York Federal Reserve, which assembled a collection of Treasury dealers on Monday and advised them to do more to prevent market manipulation. Executives from the 22 primary dealers, which buy the securities directly from the Fed, were called to a meeting with officials from the Fed and the Treasury Department.
The meeting shows Treasury officials’ mounting concerns about suspicious market activity in the trading of U.S. bonds. Investment bank UBS recently said it was cooperating with U.S. authorities who are reportedly investigating possibly manipulative trading practices.
Officials are concerned that primary dealers are using their positions unfairly, making it difficult for investors to buy the securities at market prices. Forbes.com quoted one market researcher who said the inquiry would likely extend to hedge funds that work with primary dealers on bond trading.

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