Evergrande is a Chinese real estate company that has been circling the drain for months.  During that time, press reports increasingly suggest that Evergrande's collapse could have some measure of systemic impact given the vast amount of money it owes to other institutions.  Several of the likely-to-default bonds are due this week and so far, there is no word on anything resembling a bailout from the Chinese government.  Some of the most alarming opinions have suggested this is China's "Lehman moment," but there's plenty of pushback against that thesis. 

Still, the turmoil is worth some "risk-off" trading momentum in the overnight session.  S&P futures continued Friday's selling trend, dropping more than 1.5% by 8am. Offshore Chinese equities markets tanked at the fastest pace since July (incidentally, that July sell-off was also linked to Evergrande drama, but it hadn't yet gone viral as a market mover.  Today is different though.  This time around, you're not one of the cool kids unless you're blaming Evergrande for the overnight move. 

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10yr yields started the day down more than 4bps, and up a quarter of a point.  In both cases, traders have pushed back against the rally as liquidity picks up for the day.  So maybe this is just the sort of bounce we would expect to see in response to last Friday's assessment (that the sell-off was driven by traders moving to the sidelines ahead of the weekend and Wednesday's Fed announcement).  Either way, when we zoom out on the chart, Treasuries are still in a consolidation pattern.

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