Panic, Crisis In Italy: Dealers Pull Bids As Bonds, Stocks Crash; Euro, Deutsche Bank Tumble As Contagion Spreads

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, sending the Germany-Italian spread wider by 50bps to over 300 bps, the highest in 5 years. While Italian banks are now well inside a bear market, down 24% from their recent April highs.

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

While the EURUSD tumbles below 1.16, the lowest since last July as murmurs of "parity" are once again emerging.

Meanwhile, all eyes on Draghi to see how the ECB responds now that Europe is once again facing threats to both its currency, as well as its very existence

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SideNote: The dollar continues to increase in strength against other currencies.