There were Living Weapons and then there was whatever Rain was holding. It took the word "living" to a whole another level by ejecting nearly half a dozen green bone spurs from the spine of the Greatsword.
Hao Xuan immediately got the feeling that rather than one, he was up against two completely different opponents working 'somewhat' in tandem. The sword was extremely bloodthirsty and was feeding on Rain's emotions, using all his suppressed rage and anger to fuel its transformation even through the countless seals stamped upon the rags covering it.
He had no choice but to take this 'interaction' seriously simply because of the existence of the greatsword. If one of the Nine wanted the blade so badly then surely there was a lot more to it.
And being this close to it he could easily tell it wasn't anything even remotely ordinary. Hao Xuan could hear faint wisps of a gnawing, snapping monstrous creature from inside the rags.