What is the catch behind these high yielding State Government Guaranteed Bonds?

I was browsing through @GoldenPi and came across a collection of State Government Guaranteed Bonds giving above 10% return. All these were from the same organization - UP Power Corporation Limited. I noticed that most of these bonds have been listed on the exchanges for over 2-3 years. Currently, some of these bonds are offering returns above their original coupon rate. Is there some kind of fear that these bonds will default? I came across an article that specifically mentioned UPPCL and cited losses incurred by its PF investments as a reason for worry.

But given that there is an implied sovereign guarantee behind these bonds, why is there so much worry? Is there a chance that state government owned firms in India will face bond defaults?

Yields can be more or less than coupon rate and that is usual.

I also read about some scam done by few employees of UPPCL using their PF investments but as per my little knowledge on bonds which are backed by sovereign guarantee can’t go bust unless the system is totally screwed. If they do then it can break the trust of institutions both foreign and domestic and can worsen the investment culture and can have ripple effect. So, I personally don’t think there will be a default if it is sovereign backed at lest in near term.

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