Goldman Sachs priced a deal last Thursday for Target Stores (A2/A) on its Dutch auction Web-based Open Book system that almost got pulled because of a technical snafu, according to a deal participant. It was the second such snafu in the past several weeks (BW, 5/1). The deal, a $550 million five-year note, was eventually priced at 101 basis points off the five-year Treasury curve and placed via traditional syndicate method, although not before the bond market rallied nearly 13 basis points, shutting investors out of a potentially profitable trading opportunity. A Goldman spokesperson confirmed the problem, but would not comment on the nature of the glitch. A phone call to the treasurer's office at Target was not returned by press-time.
The trouble started when the auction's site showing the indicated bid levels crashed at 2:59 p.m. EST, one minute before the auction was set to close. Goldman syndicate officials, who refused to comment on the matter, then executed the transaction manually, closing it by 4:30 p.m. Unfortunately for investors, the five-year was staging a sharp rally at that point, which precluded investors from flipping out of the bonds at a profit if they so chose. One buysider viewed snafu with equanimity: "Between this and the Bear [Stearns] problem two weeks ago, I think dealers are going to have to work a lot harder at squaring their technology away." He did say however that Goldman's traditional execution on the deal was good, noting that he got his full allocation of bonds.