NEW YORK: More than 20 lawsuits have been filed in the United States accusing large banks of rigging the US Treasury bond market in a similar fashion to other recent collusion cases.

Plaintiffs charge that large banks collaborated to depress the price of bonds in the $12.7 trillion US Treasury market when they were offered by the US government and then sold the bonds at a higher price in the secondary market.

The alleged conspiracy by the banks, designated by the US Treasury Department as “primary dealers” in bond auctions, lifted the government’s cost of issuing bonds by increasing yields.

In a suit filed in August, the Cleveland Bakers and Teamsters Pension Fund and other plaintiffs that bought bonds point to quantitative analysis of bond transactions between 2007 and 2015 in the primary and secondary bond market.

“Instead of competing with each other at arms’ length, the Defendants ... conspired artificially to drive up the yield of Treasuries (and correspondingly to drive down the prices of those Treasuries),” the complaint said.

“Defendants then turned around and sold the Treasuries at higher prices (and correspondingly lower yields) in the secondary market, reaping substantial profits.”

The data showed yields in the primary market were “inflated” in 69 per cent of auctions, according to the complaint.

“This repeated bias cannot be explained as a result of random chance; instead the only plausible explanation is that Defendants coordinated artificially.”

Published in Dawn October 3rd, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play