U.K.'s FCA Said to Probe Lloyds Traders Over Bond Rigging

  • U.K. regulator investigating government-bond manipulation
  • Allegations traders may have driven down prices for profits

Lloyds Banking Group Plc traders are being investigated by the U.K. Financial Conduct Authority over possible manipulation of the British government-bond market in the latest in a string of market-rigging probes by the regulator, according to a person with knowledge of the situation.

The FCA is looking at whether traders tried to drive down prices of U.K. gilts in government auctions or falsely increase the prices of those sold to investors in a bid to maximize profits, according to the person, who didn’t want to be identified because the probe is private. The regulator’s case is at an early stage and Lloyds has been cooperating with FCA requests for information, the person said.

The FCA has spent the last five years investigating rigging in some of the world’s biggest markets, with fines running into the billions against banks and traders for manipulation of the London interbank offered rate and key foreign-exchange benchmarks. The U.S. Justice Department is separately investigating the $12.8 trillion market for U.S. Treasuries as well as possible manipulation in the trading of agency bonds -- $9 trillion or more in debt issued by the likes of German states, government entities and the World Bank.

A spokesman for Lloyds said in an e-mailed statement "the group does not comment on speculation." A spokesman for the FCA declined to comment.

Lloyds agreed in 2014 to pay $370 million to U.K. and U.S. authorities for manipulating Libor. As part of that resolution, Lloyds admitted to the misconduct and entered into a two-year deferred-prosecution agreement with the Justice Department that requires the lender to cooperate with prosecutors and not commit additional crimes.

News of the investigation was reported earlier by the Wall Street Journal.

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