LONDON — An analysis of UK government bond futures prepared for the Wall Street Journal suggests that sensitive economic data is being leaked to the market ahead of its official publication, allowing traders to profit from inside information.
The Wall Street Journal asked Alexander Kurov, associate professor of finance at West Virginia University, to analyse price data in the hour before key economic data was released, covering the period April 2011 to December 2016.
Professor Kurov found that bond future prices moved on average by 0.029% in the direction they would continue to move after the data was published, suggesting someone had inside information.
Professor Kurov told the paper: “Based on what I see in the data in this case, it is very unlikely that we are looking at a random pattern.”
While o.029% may not sound like a significant move, the size of the UK bond future market analysed by the professor means that a gain of this size would add £68 billion ($82.4 billion) to the market. The 0.029% also represents, on average, more than a third of the total move in the market in the two hours surrounding the release of specific data.
Professor Kurov looked at 207 data releases covering inflation, industrial production, and labour market data. 172 were considered surprising by the market, meaning moves before the release in the correct direction appear highly suspicious.
The Wall Street Journal notes that rumours of leaks have circulated on Twitter and in government for several years and the Office for National Statistics (ONS) investigated suspicions of leaked inflation data in 2011. However, nothing was found.
You can read the full Wall Street Journal article here.
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