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Debunking common myths about securitised credit
Securitised bonds, often shrouded in complexity and financial jargon, have been a cornerstone of the US financial markets for decades.
Despite their significance, these instruments are frequently misunderstood, giving rise to numerous myths and misconceptions. From the belief that they are inherently risky , to the notion that they were solely responsible for the 2008 financial crisis, securitised bonds are often viewed through a lens of scepticism and misinformation.
This article aims to demystify these financial products, shedding light on their true nature, potential benefits, and the realities of their risks. By debunking three common myths, we hope to provide a clearer understanding of securitised bonds and their role in the broader financial ecosystem.
Myth 1 – “I don’t trust the ratings. Securitisation turns low-quality bonds into high-quality bonds – that’s not possible”.
Myth 2 – “Securitised bonds caused the global financial crisis. If it happened once, then it can happen again”.
Myth 3 – “Securitisation only benefits financial institutions. It’s too complex for average investors to understand”.
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