With UK traders returning from vacation, Italy woke up to a sheer selling panic as yesterday’s “modest” selloff mutated into a full-blown liquidation avalanche, lead by a furious repricing of the BTP curve, where 2Y yields exploded another 170 bps higher on the day rising to 2.60% from negative just a few days ago…

… the biggest one day move in Italian 2Y yield in history…

… while the 10Y blew out as much as 70bps to 3.40%, now finally higher than US Treasurys…

… its biggest one day move since the 2011 European debt crisis…

… sending the Germany-Italian spread wider by 50bps to over 300 bps, the highest in 5 years.

Confirming the market revulsion to anything Italian, today’s 6-month bill sale by Rome was met with surprisingly poor demand, covered 1.19 only times, the lowest since April 2010, despite what continues to be an ECB backstop.

Stocks fared no better, with Italian equities tumbling as much as 3% today and now back to the lowest level since last July…

… while Italian banks are now well inside a bear market, down 24% from their recent April highs.

As a result of the panic selling, not seen since the days of the European sovereign debt crisis in 2011/2012, dealers pulled their price indications, which according to Bloomberg signalled dealer unwillingness to trade given the excessive volatility.

But what is even worse is that this is no longer just an Italian crisis, as Deutsche Bank stock tumbled below €10 for the first time since its existential close encounter in September 2016, and just why of all time lows, on fears Italy’s problems will spread beyond its borders…

… but it’s not just Germany as French banks are also getting slammed:

• FRENCH MAJOR BANKS’ 5-YEAR CDS JUMP 50 BPS OR MORE FROM MONDAY CLOSE ON ITALIAN POLITICAL RISK, BNP PARIBAS HIGHEST SINCE APRIL 2017 -IHS MARKIT

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