SEC to probe possible leak of decision to stop selling 30-year bonds

Associated Press

WASHINGTON — The Securities and Exchange Commission began its own investigation Tuesday into allegations that someone leaked market-sensitive information about a surprise government decision to stop selling 30-year bonds.

The Treasury Department’s general counsel and inspector general have conducted preliminary investigations into last week’s possible leak. Treasury officials had said that if they concluded a breach of rules occurred, the case could be referred to the SEC or the Justice Department for further investigation.

The SEC said it received such a referral from Treasury and has "initiated an investigation into the circumstances surrounding the announcement of the Treasury’s decision to end its 30-year bond offerings."

Stephen Cutler, the SEC’s enforcement director, promised the commission would "vigorously pursue this matter."

Treasury Inspector General Jeffrey Rush said his office will coordinate with the SEC but declined to say if his office would conduct a separate probe.

Treasury unexpectedly announced last Wednesday, as part of its regularly scheduled quarterly briefings on its borrowing needs, that it would no longer sell 30-year Treasury bonds and would rely instead on securities with a shorter maturity to finance the national debt.

The decision prompted a huge bond-market rally. Demand for 30-year bonds in circulation soared as investors rushed to snap up a product that offers a government-guaranteed interest rate for such a long period. The spike in demand pushed down the yield on 30-year bonds to 4.87 percent, the lowest since October 1998.

The alleged breach of rules began when a private consultant attended a press-only briefing in which the government’s financing plans for the quarter were revealed. Reporters at the briefing were required to refrain from publishing or broadcasting the information until the government made its official announcement. But the consultant informed clients of the market-sensitive decision while the information was still restricted.

Separately, Treasury itself had put out information on its financing plans, including the 30-year bond suspension, prior to the official announcement. The department posted the financing information on its Web site around 9:50 a.m. Under the embargo, the information was not supposed to be published until 10 a.m.

Treasury spokeswoman Michele Davis on Monday called that posting a "careless mistake." Officials did not say whether this was part of Treasury’s probe.