This weapon enchantment is not reducing enemy defense by anything at all, when testing on Guild Hall dummies, comparing damage (full damage) in combat log.
Is your armor pen capped against those dummies? This should ideally be tested in a dungeon where mobs stats are known, and having your armor pen below maxed?
Dread only reduce defense, not damage resistance. If you have capped armor penetration it won't grant extra damage. It simply helps reaching armor penetration cap by reducing enemy's defense.
I removed Bonding & Runestones to get my Armor Penetration down to 30,000 and then alternated between attacking with a Dread Enchantment Rank 14 equipped and then taking it off. I was using an Reave at-will against a single dummy. If Dread rank 14 defense reduction is working for someone else let me know... and this Bug Report can be closed. I tried testing in Avernus... but got inconsistent results... none of them showed a increase in damage for myself or for a companion though.
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