Prosecutors in on Citigroup bonds deal

ALL eyes were on Britain's Financial Services Authority (FSA) today, as German regulators investigating a controversial European bond trade by Citigroup found evidence of market manipulation and turned the case over to criminal prosecutors.

German regulatory agency BaFin launched an investigation last October into the early-August transaction, which the bank has admitted was 'knuckleheaded'.

Citigroup Global Markets sold €11.8bn (£8.4bn) of European government bonds on 13 separate trading platforms in 11 different markets, causing prices to fall. The bank then bought back roughly €4bn in bonds at lower prices an hour later.

'There are indications that market manipulation took place in connection with Citigroup's bond trade,' said BaFin spokeswoman Sabine Reimer.

The German move puts pressure on the FSA, which is also investigating Citigroup's actions.

Citigroup said it would continue to co-operate with regulatory authorities but insisted it had done nothing wrong.

'We are disappointed that BaFin has referred to the prosecutor the question of whether action should be brought against individuals involved in the matter,' it said.