Goldman questioned about profits at end of long bonds Jill Treanor in New York Tuesday November 13, 2001 The Guardian
Goldman Sachs is being questioned by US regulatory authorities as part of an investigation into whether firms were able to make profits from advance warning of the treasury's historic decision to stop selling 30-year long bonds. The Wall Street firm admitted to the securities and exchange commission that it knew around 19 minutes before the official announcement that the treasury department had decided to abandon auctions of the world's best known bond. Wall Street experts believe the investigation is likely to become one of the biggest in recent years into the world's most active bond market. Goldman is the largest bond market player to acknowledge having advance notice of the announcement which it received from Pete Davis, a long-standing industry consultant who had attended a briefing for the media on October 31, which was subject to an embargo before an announcement to the market. "When we became aware of this situation, we contacted the appropriate authorities to inform them of Mr Davis' call and provide them with any and all information that may be of assistance to them in connection with any review they wished to conduct. We do not believe we have engaged in any wrongful behaviour," Goldman said yesterday. Goldman refused to elaborate. The SEC would only confirm it had initiated an "investigation into the circumstances surrounding the announcement of the treasury's decision to end its 30-year bond offerings". Until Goldman's acknowledgement that it had been tipped off before hand, Wall Street experts had thought only some of the smaller bond market houses had received the information. It is not clear whether Goldman or any other firm made money from the advance information, which Mr Davis has admitted he passed on shortly after the press conference ended and before the official announcement. According to the Wall Street Journal, traders at rival firms believe that Goldman suddenly changed its previous stance that morning. But, there may have been other reasons why the firm stopped betting that the price of bonds would fall and start to rise - as they did after announcement.
