1, the income is attractive. Among AAA rated assets, the yield of asset-backed securities is higher than that of US Treasury bonds with the same maturity, and its yield is roughly equivalent to that of corporate bonds or mortgage-backed bonds with the same maturity and credit rating.
2. High credit rating. From the perspective of credit, asset-backed securities are one of the safest investment tools. Similar to other debt instruments, they are also evaluated and rated according to their ability to repay principal and interest on time. However, unlike most corporate bonds, asset-backed securities are protected by collateral, and their internal structural characteristics are enhanced by external protection measures, thus further ensuring the realization of debt liability. Most asset-backed securities have obtained the highest credit rating-triple A from major credit rating agencies.
3. Diversification and diversification of investment. Asset-backed securities market is a highly diversified market in structure, income, term and guarantee mode. Assets used to support securities cover different business areas, from credit card receivables to loans for cars, boats and leisure facilities, from equipment leasing to real estate and bank loans. In addition, asset-backed securities provide investors with the conditions to diversify the fixed-income securities that are traditionally concentrated in government bonds, money market bonds or corporate bonds.
4. Predictable cash flow. The stability and predictability of cash flow of many types of asset-backed securities have been well set. Investors who buy asset-backed securities have strong confidence to make the expected repayment on time. However, for asset-backed securities with similar guarantees, there may be uncertainty in prepayment, so investors must understand that the predictability of cash flow at this time is not so accurate. This high degree of uncertainty is often reflected in high profitability.
5. The event risk is small. Asset-backed securities are guaranteed by basic assets, which provide protection measures against the rating decline caused by event risk, which is more obvious than corporate bonds. Investors' main concern about unsecured corporate bonds is that, no matter how high the rating is, the rating agencies will downgrade its rating in the event of an event that has a serious impact on the issuer. Similar events include merger, acquisition, reorganization, capital reorganization, etc., which are usually implemented by the company's management in order to improve shareholders' income.