macrocephalopod

It's an inflation-linked perpetual bond backed by the US government with less vol and more duration that the S&P, so assuming it was a ~negligible component of the debt structure I expect it would well above the current SPX level, probably with a yield around 1%, so that's 6k

The default risk is embedded in what’s paid by companies in the S&P 500. There is no risk to what has already been received or what will be received via div. A S&P dividend bond would be priced lower if the bond was issued by a company vs treasury, but 100% discount to S&P 500.

Imagine if the government promised to pay the yield on an BBB bond index. Would that promise trade above or below the price level of the index now that you've eliminated the default risk? Why would that be different if you're paying a dividend yield instead?

The default risk is embedded in the cash flows that the high yield bonds pay out! If they default and don’t pay, the “government backed” fund doesn’t pay them either because it pays the exact same cash flows.

With the bond you suffer a loss of principal when it defaults. With the government security you don’t — the bond is just replaced with another one and the yield is ~unchanged. You have the cash flows without most of the default risk (only the coupon is at risk, not the principal)

The principal is reduced because of uncertainty or elimination of the cash flows... those cash flows are identical in the government version so the value would be reduced as well.