A bond analyst is looking at sector spreads. During his research, he noticed that a particular segment of investors tends to move back and forth between the bonds issued by the defense industry and the technology industry depending on their outlook. Following the recent developments in the geopolitical climate, he anticipates the defense industry will most likely expand their production capability in the near future. All else being equal, which of the following best describes the likely the impact of this change on the market for technology bonds?
A. No impact, since these markets function independently of done another.
B. The demand for capital will expand in the technology sector, lowering the interest rates on technology bonds and narrowing the technology sector spread
C. The supply of capital in the defense industry will expand, lowering the interest rate and narrowing the defense sector spread.
D. The end result will be higher interest rates in the technology industry and sector spreads will remain about the same relative to one another.
A. No impact, since these markets function independently of done another.
B. The demand for capital will expand in the technology sector, lowering the interest rates on technology bonds and narrowing the technology sector spread
C. The supply of capital in the defense industry will expand, lowering the interest rate and narrowing the defense sector spread.
D. The end result will be higher interest rates in the technology industry and sector spreads will remain about the same relative to one another.