WASHINGTON - House lawmakers seeking information collected by the Federal Reserve Bank of New York on possible "short squeezes" in a number of large government bond auctions that took place in 1991 and 1992.
The request came in a letter dated Dec. 17 to E. Gerald Corrigan, president of the New York Fed, from Rep. Edward Markey, chairman of the House Energy and Commerce subcommittee on telecommunications and finance.
The Massachusetts Democrat said he wanted the information to help guide the subcommittee in preparing for hearings expected early next year on new legislation to strengthen federal regulation of the government bond market.
Markey asked what the government has learned about possible squeezes in five specific note auctions: the $9.5 billion sale of seven-year notes in January 1992; three $9 billion sales of five-year notes in October, November, and December 1991; and the $14.75 billion sale of two-year notes in May 1992.
In addition, Markey asked for an explanation of the government's decision to reopen $11.25 billion in 10-year notes at the November 1992 quarterly refunding. The reopening decision was the first to occur under the government's new policy of offering more of an issue to combat an "acute and protracted" supply problem that affects prices.
In a note squeeze, an issue is in such short supply that dealers who need the security are willing to lend money at a low interest rate to attract owners to lend the note. A squeeze can develop under normal market conditions and is not illegal unless it is a deliberate attempt to get control of the market.