Insider Trading — Bond Guys Can Play Too

Insider trading is a tricky charge to make stick in equity markets, and it is almost unheard of in bond markets. But two years ago it happened, and today the insider was sentenced.

John Youngdahl, a Goldman Sachs economist, plead guilty today to charges that two years ago Peter Davis, a Washington consultant, told him that the U.S. Treasury was about to stop selling 30-year bonds. Youngdahl told Goldman traders, and they did what traders do: they bought $84 million of 30-year bonds and $233.6 million of 30-year bond futures. When the news subsequently broke, said traders made bundles as 30-year bonds had their biggest gain in 14 years.

You may be asking yourself, how did the consultant know? Well, that goes back to the inner workings of Treasury. He learned about the planned change at a Treasury Department press briefings, one where the press was under an information embargo.

And what was a Goldman Sachs consultant doing at a Treasury Department press briefing? Good question. At the time there were few limits on who could attend these briefings. Policy has, understandably, since changed.

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  3. Posturing to Play Martha Pundit
  4. Why is the bond market so happy?
  5. Play economic deity, move markets, etc.