A key function of financial intermediaries is to borrow in financial markets and lend to firms. I show that this creates informational linkages between repo and corporate bond markets. My key result is improving transparency in either market may lower welfare even if funding liquidity improves. My model’s predictions are consistent with the bond and repo market dysfunction during the 2008 global financial and COVID-19 crises, and the impact of the introduction of TRACE on bond markets in 2002. Central to my findings is that bond prices serve as useful signals that minimize firm’s aggregate distress costs by coordinating their borrowing and intermediaries’ lending activities.