Two-Way Flow On Evergrande Developments, FOMC In View

Global core FI markets unwound their early Asia-Pac bid and more, before moving back to the middle of their respective daily ranges. Initial worry surrounding all things Evergrande as participants awaited the re-opening of mainland Chinese markets after the elongated holiday weekend subsided. There was some respite for broader risk assets as headlines noted that Evergrande will make a negotiated bond coupon payment for onshore bonds which falls due tomorrow, although no further details were forthcoming. There were no details re: the payment of coupons on a US$-denominated bond also due tomorrow (although there is a 30-day grace period in play there there), nor on the size of the payment that will be made when it comes to the onshore bond coupons. The lack of clarity tempered the broader bounce in risk appetite.

• T-Notes -0-01 at 133-05 as a result, with cash Tsys little changed to 0.5bp cheaper across the curve.
• To recap, T-Notes went out around the middle of their range on Tuesday, after testing Monday's high in the wake of a BBG source report which noted thatEvergrande missed interest payments due to at least two of its major creditors on Monday (no surprise). Still, cash Tsys were little changed to ~1.0bp cheaper come the bell, with 10s representing the weak point on the curve. 20-Year Tsy supply was well received, stopping through WI by 0.2bp, as primary dealer takedown slid to the lowest level witnessed since 20-Year supply was reintroduced, although the cover ratio saw a marginal downtick when compared to the previous auction. The well-received round of supply allowed 20s to richen to the firmest levels witnessed since April on the 10-/20-/30-Year butterfly.
• The FOMC monetary policy decision headlines the broader docket on Wednesday, with the central bank's commentary surrounding tapering and the particulars within the SEP set to be scrutinised.