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Treasuries opened cheaper as government shutdown fears averted over the weekend with yields 4-5bps cheaper across the curve. Beat in European PMIs as well as heavier JGBs overnight also helped market reverse month-end related bounce on Friday. Curve bull steepened after lower ISM prices paid (43.8 vs 49 expected) but rally was short-lived as manufacturing and employment were higher and duration started to sell off into the afternoon led by the long end. Curve bear steepened despite hawkish Bowman comments urging multiple hikes to curb inflation as 20s moved above 5% and 10yr yields trading up to 4.70%. Flows were quiet with RM buying 2s and selling 5s, HF two-way in 20s and CB buying 30s. Powell’s appearance with Harker at roundtable was a non-event. Nov meeting edged up pricing 8bps as market waits for labor data this week starting with JOLTs tomorrow. Duration continues to remain weak and despite new cycle highs in yield, market remains wary of initiating longs as path of least resistance still points to higher yield near-term.

In China IG and HY, muted session with China for the golden week holidays. Seeing small buying from RM accounts with spreads looking about 1-2bps tighter as market traded some low beta TMTs while there was some selling of front end HG property names. China Evergrande and Evergrande Property Services shares to resume trading on 3 Oct; board sees no other inside information that needs to be disclosed currently; Chairman Hui Ka Yan is being investigated by authorities concerned in China over possible transfer of assets offshore. COGARD's indirectly fully owned subsidiary Guangdong Giant Leap Construction announced the resignation of Yang Baojian as CEO and legal representative and the appointment of Yang Zehui as its new CEO and legal representative. 

In IG, started light but activity picked up throughout the day. Flows can be surmised as light two-way flows between RM accounts and better buying from PBs, looking about unchanged to 1bp tighter. EXIMBK 10yr PB continued buying. PETMK also saw some two-way interest going on after better selling on Friday night by RM accounts. PTTGC had a massive rally last week with the belly moving about 20bps tighter w/w and long ends about 10bps tighter, with RM/FM buying alongside street lifts although some selling in the belly near the tights. Will be interesting to see if the long-ends will finally play catch up but seems like there's not much room for the belly to run given the 31s are almost at pre-downgrade levels. In HY, quiet session with HK out for holiday with level unchanged to -0.25pt due to a combination of rates and also marginal selling. VEDLN had a few headlines out over the weekend, levels were about 0.75pt lower with some selling but otherwise is mostly contained.

AT1s closed the day about unchanged, giving back their morning gains as treasuries sold off post-lunch.  Decent early demand from both dealers and some asset managers. USD paper underperformed EUR, closing about 5-10c lower. RBIAV was the outperformer again, closing 0.375-0.5pts higher as optimism grows over their chances of getting approval from Russia to divest their operation there. Volumes were decent, with good 2-way flow in the morning especially. Active names include SOCGEN, BNP, HSBC, LLOYDS, RBIAV, SANTAN, UBS and the Canadian names.