Bond trading has never had the shiniest of reputations — from Michael Lewis's Liar’s Poker to Bonfire of the Vanities to the rorting of key interest rate benchmarks like the global LIBOR and Australian BBSW.
It's ironic, for instruments supposed to have the lowest risk next to cash, that bond traders are constantly finding new ways to try to game the system and boost their bonuses. Traders say it’s a “cultural thing”, but some cultures are clearly more marginal than others.
For all the work ANZ has done over the last eight years renovating and cleaning out its institutional bank, which houses bond trading, it remains a recidivist when it comes to reputation risk in financial markets.
The latest revelations came in today's Australian Financial Review, which reported that ANZ’s markets division “overstated the value of government bonds it traded by more than $50 billion in 12 months alone, boosting its prospects of winning lucrative mandates issuing Commonwealth debts”.
