The Justice Department is looking into possible fraudulent manipulation of the $12.5 trillion Treasurys market, The Post has learned.
Government lawyers are said to be in the early stages of a probe and have reached out in recent months to at least three of the 22 financial institutions that act as primary government debt dealers to request information, said a person close to one of the banks who was briefed on the matter.
The focus of the probe is on Treasury auctions, a secretive process when interest rates are set for the offerings, the person said.
No single bank has become the focus of the probe, it is believed, and no bank has been accused of any wrongdoing at this time. There is no guarantee that the requests for information will turn up wrongdoing.
A spokesman for the DOJ declined to comment.
The request for information came as Justice was set to wrap up a probe into manipulation of foreign currency rates.
Also last month, five banks pleaded guilty and paid a total of $5 billion in fines to settle a Justice probe into rigging Libor rates.
Treasurys are a bedrock of the US financial system. Their sale raises money to fund the US government and the rate attached to their sale affects a range of borrowing costs — including home mortgages, auto loans, credit cards and corporate bonds.
Last year, the Treasury Department issued some $7 trillion in debt.
Treasurys are considered the most easily traded and trusted debt in the world. They are sold through regular auctions, and include bills, notes and bonds with maturities ranging from a few weeks to 30 years.
After Treasury announces a debt sale, institutional investors place two kinds of bids — competitive, which can get as much as 35 percent of the issuance, or non-competitive, which get a maximum of $5 million.
The banks’ competitive bids, submitted in secret ballots, detail how much they’re willing to pay for the debt. Only some of the bids are ever made public.
A higher price for the debt — and thus, lower interest rate — signals stronger demand and confidence in the US paying back its debt.
By contrast, lower bids and sale prices mean higher interest rates — an expense that’s ultimately borne by taxpayers.
Taxpayers owed $107 billion in debt due to interest for the year through March, according to the most recent report from Treasury.
Much of that interest accumulated from the amount of interest that was set during the auctions, according to the report.
Representatives for the primary dealer banks, the DOJ and Treasury declined to comment.