Money,banking Suppose a new Web site was launched providing up-to date, credible information on all firms wishing to issue bond. What would you expect to happen to the overall level of interest...
Suppose a new Web site was launched providing up-to date, credible information on all firms wishing to issue bond. What would you expect to happen to the overall level of interest rates in the bond market?
Well, not meaning to be contrary, I think recent history indicates that Internet-based information increases activity in investment (in anything). Self-managed investment was revolutionary in the 80s as the financial industry had been only newly deregulated. Once self-managed stock investment was made available on the Internet, participation steadily accelerated to today's current (and surprising ) levels. The same would hold true if exhaustive information on bond investment came to the Internet, as the question assumes it isn't already. Part of the reason for the escalation is that brokers specialize and do not have all the relevant information in all fields of investment; that would be impossible especially in today's enlarged, multi-faceted industry.
It would allow people to make better-informed decisions about their financial activity, but I think rates would remain the same, as the good investments wouldn't change much and the worse investments would lower and wink out, leaving the average to wobble back to the center.
The major impact would be for investment companies; they would no longer have a monopoly on verifiable information, and so their services would be of less importance, leaving the field open for individual investors instead of conglomerates.
I'm inclined to agree with anwers 2 and 5. It's possible, though, that in the long run interest rates would decline because there might ultimately be fewer risky investments and so it might be possible for interest rates to be lowered. Here's an analogy: if banks were able to predict with absolute certainty which borrowers were risky borrowers and which were dependable borrowers, interest rates for dependable borrowers might decline.
I would expect that the overall level would not change. What I would expect to see is that there would be a much greater degree of variation. If investors had this sort of information, the interest rates that solid firms have to pay would go down because investors would realize those firms were low-risk. But other firms would see their rates rise as it became clear they were relatively high risks.
Rates would remain constant, but as other editors have indicated, the only difference would be that investors would be far more aware of what would be a good investment and what would be a poor investment. As a result, the major change would be felt by the bond companies as companies that only offer poor investments would quickly find that they go out of business.
Having more information about a company might make people invest differently, but I don't think it would affect the interest rates very much. Bond rates are disclosed at the time of purchase, so it is all a matter of how solid a company is who is issuing the bond, and how willing the investor is to take the risk.
I find it highly unlikely that such a web site would exist. Also, I still think that most people hire someone to invest their money for them, even though there are more individual investors in this internet age. Theoretically, these professionals already have the information.