In December 2001, Argentina announced it would not honor its sovereign (government-issued) debt. Many investors were left holding Argentinean bonds priced at a fraction of their previous value. A few years later, Argentina announced it would pay back 25% of the face value of its debt. Comment on the effects of information asymmetries on government bond markets. Do you think investors are currently willing to buy bonds issued by the government of Argentina? Concept Introduction: Information Asymmetry occurs where one party has more information than the other. This information asymmetry leads to an imbalance of power in transactions which can further lead to market failure.

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In December 2001, Argentina announced it would not honor its sovereign (government-issued) debt. Many investors were left holding Argentinean bonds priced at a fraction of their previous value. A few years later, Argentina announced it would pay back 25% of the face value of its debt. Comment on the effects of information asymmetries on government bond markets. Do you think investors are currently willing to buy bonds issued by the government of Argentina?

Concept Introduction:

Information Asymmetry occurs where one party has more information than the other. This information asymmetry leads to an imbalance of power in transactions which can further lead to market failure.

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