Goldman Sachs Group Inc. was prevented from participating in the Sept. 9 auction of three-month U.S. Treasuries because of a malfunction with the government’s online order system, according to a person with direct knowledge of the matter.
One bidder couldn’t participate in the sale of three-month bills due to a “technical error” with the government’s TAAPS system, the Treasury’s Bureau of Public Debt said Sept. 10 on its website. Goldman Sachs was the firm that was locked out, according to a person briefed on the event, who asked not to be identified because the discussions were private.
The disruption in the Treasury auction comes as U.S. regulators press for improvements in the infrastructure of American equity and derivatives markets. Following Nasdaq OMX Group Inc.’s three-hour trading halt on Aug. 22, Securities and Exchange Commission Chairman Mary Jo White told U.S. stock markets on Sept. 12 to collaborate on bolstering technology systems. On Sept. 9, U.S. Commodity Futures Trading Commission requested industry input on safeguarding markets.
The Bureau of Public Debt “continues to test its systems to maintain the smooth functioning of Treasury auctions,” it said on Sept. 10. The government said attempts to address the Sept. 9 malfunction “ultimately resulted” in the bidder buying more than 35 percent of the six-month bills that were sold, which normally isn’t allowed.
“We have determined that it is in the best interest of market participants to waive the 35 percent limitation and for yesterday’s auctions to stand,” the Bureau of the Public Debt said on Sept. 10.
Tiffany Galvin, a spokeswoman for New York-based Goldman Sachs, declined to comment. Brandi Hoffine, a Treasury spokeswoman, wouldn’t elaborate beyond the Bureau of Public Debt’s Sept. 10 statement.
The Wall Street Journal reported earlier that Goldman Sachs had been shut out of the auction of three-month bills.
The Treasury sold $30 billion of three-month bills and $25 billion of six-month bills on Sept. 9. Rates on six-month bills fell after the auction concluded at 11:30 a.m. New York time that day, sinking as low as 0.0203 percent from 0.0304 percent at 11:29 a.m.
The market reaction is “indicative of just how scarce Treasury bills are relative to the amount of money looking for very short-term, very liquid investments,” said Thomas Simons, a government-debt economist in New York at the primary dealer Jefferies LLC. “When one particular bidder is awarded a very large amount of an auction, it will cause” a scramble by other investors to obtain Treasury bills needed, he said.
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