Fixed income market traders suggest the controversial practice of “pre-hedging” banks’ interest rate risk is at the heart of the corporate regulator’s investigation into ANZ Bank’s handling of a $14 billion federal government bond sale.

Anna Hughes, head of the Australian Office of Financial Management, which is the funding arm of Treasury, said the focus of regulators is a bond that was priced on April 19 last year. She added that ASIC decided to pursue its investigation, revealed by The Australian Financial Review on Monday, after a post-deal briefing.