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Treasuries opened lower in yield after yesterday’s torrid sell-off that dragged 10yr and 30yr rates to their highest levels in over a decade, but longer-dated tenors spent most of the session weakening and pushed the curve to ultimately close bear steeper – the long-end added another ~4bp while the short-end was essentially unchanged. Selling through the morning and into the afternoon was enough to support a solid 2-year auction, which marginally stronger demand versus last month, but which rallied back to close unchanged after the auction.

In China IG, spreads are unchanged to -3bps tighter, with local all-in yield buyers in TMT and financials. HRINTH a bit soft with bonds about -50c lower with some light selling from RMs. PINGRE continues to be topical with some RM selling vs HF buying, bonds about -1pt down. Alibaba Group said it will spin off Cainiao Smart Logistics Network, through an IPO in HK; Alibaba will continue to hold over 50% of the unit’s shares, and Cainiao will remain a subsidiary of the company.

In China HY, grinding lower across in line with macro sentiment and sentiment soggy out of China. Property going lower on light flows as incremental buyers remain rare and in small sizes, space down another 1-2pts. Macau grinding in a tight range with two-way flows going through between RMs with globals better buyers and locals and ETFs better seller in general. Country Garden pays initial up to RMB100k principal, accrued interest on termed-out panda bonds onshore.

In Sovereigns, INDON/PHIL traded unchanged to 0.375 pt lower owing to weaker macro backdrop and the continuing volatile UST moves. Flows overnight were skewed to sellers from ETFs for EMBI issues, while Asia flow has been more two-way on selected issues recently. Indian IG remained unfazed. Flows were more balanced and buying interest across bank and PSU papers. The private sector corps (BHARTI/RILIN) saw better selling, but were well absorbed. Overall, spreads were tighter in this space. Seeing reports of Adani Ports planning a cash tender offer of as much as USD195 mm for the USD520 mm ADSEZ 3.375 07/24/24. According to the announcement, early tender is 97.50 (11.10.2023 deadline) with final tender deadline on 30.10.2023 (at 96.50). On the back of the news, Street already traded the ADSEZ 3.1 31 up at 69.50 this morning. In HY finally saw some meaningful moves on Tuesday, dropping 0.25-0.75 pt, led by renewables. Sellers mostly comprised of real money accounts and ETF flows. At the lower levels with some real money coming in to buy, especially on higher quality papers like HBSPIN. Vedanta Resources was lowered further into sub-investment grade territory by Moody's with the corporate family rating downgraded to Caa2 from Caa1 and the bonds one notch lower, as the company struggles with refinancing. While in Indon HY space, finally seeing bonds trading lower and dealers no longer aggressively paying for papers as stale shorts were covered. Calling it 0.25 pt or so lower on Tuesday. Positive technicals should limit the downside here but the outperformance vs equity and SOVs at the moment were attracting profit takers.

AT1s closed the day about 0.25pts lower, with longer calls underperforming and continue to adjust to the higher govt bond yields. Decent activity in terms of flows, with some selective buying from asset managers and HFs versus selling from ETFs. Active names include SOCGEN, BNP, UBS, WSTP, RBIAV, ERSTBK, ABNANV, BAERVX and small sizes in Canadian names.