That's actually a fascinating error that people make with fixed-income investing; too much focus on safety of principal vs. actual compounded yield and recovery rate in the case of default.
But that then begs the question, what happens if the custodian goes bust? Well custodians also have a custodian, diversifying the risk one step further (but not completely). Custodian inception!
Further on this here:
https://moneykingnz.com/what-happens-to-your-money-if-invest...