DOJ Eyes Deutsche Bank in Auction Probe, Post Reports

Deutsche Bank AG has emerged as a focus of a probe into whether traders rigged auctions for U.S. government debt, the New York Post reported, citing unidentified people familiar with the matter.

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 Treasuries, the newspaper reported. That group includes the biggest Wall Street banks and their counterparts in Europe and Asia, the Post said. The brokerage arm of Wells Fargo & Co. joined the primary dealer group in April to become the 23rd member.

Deutsche Bank said in its annual report that it had received requests for information and documents related to auctions and trading of U.S. Treasuries. The Department of Justice began an investigation a year ago, and regulators including the Securities and Exchange Commission are also probing the potential misconduct, the Post said.

“Deutsche Bank is cooperating with the industrywide investigations into the auction market,” said Amy Chang, a spokeswoman for the firm in Hong Kong. “Based on our review to date, we have no reason to believe we are the focal point of any investigation into this market.”

U.S. authorities have been gathering information from primary dealers, scrutinizing how firms handled communications and whether any traders sought to improperly tilt Treasury auctions in their favor, people familiar with the situation said last year. The broad inquiries also were said to encompass when-issued securities -- instruments that are generally sold to investors to guarantee their ability to get their hands on a bond, bill or note once it’s issued. Investor lawsuits claim banks artificially sought to inflate prices of those instruments, later profiting in auctions.

In a November filing, Goldman Sachs Group Inc. added the offering and auction of securities, as well as when-issued trading, to a list of activities that regulators and other government bodies are investigating. It said it’s cooperating with all investigations.

(Corrects government arm conducting probe in headline, bank’s previous disclosure in third paragraph.)
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