It would appear that investors in Italian assets have "more to fear that fear itself" as the mention of 'mini-BoTs' - and the implicit parallel currency nature of these short-dated IOUs - has spooked Italian banks, Italian bonds, and Italian credit risk dramatically...

“The market will remain on somewhat of a knife edge as regards the intended plans and as the coalition government itself evolves,” Rabobank International strategists led by Richard McGuire wrote in a note.

“The fiscal credibility of the plan is far from guaranteed.”

2Y Yields are spiking...

10Y Yields are spiking...

“Italian bonds are not the right long for those with market-to-market issues right now,” said Chatwell. “Instead, being long core bonds, and increasing duration, is the better risk-reward.”

Italian bond risk is spiking...

“What is seen as a de facto parallel currency would be a major negative development for the euro should any new Italian government seek to pursue it,” wrote Viraj Patel, a foreign-exchange strategist at ING Groep NV in London in a note to clients.

“A further widening in spreads would place downward pressure on euro-dollar.”

And perhaps most notable is that very short-dated CDS premia are exploding - signifying growing concerns that an Italian Euro is NOT worth the same as German Euro...

All of which is bettering Italian banks...

Italy's banks are bearing the brunt of the selloff in the country's assets, and things may get rose before they get better. Apart from banks' underperformance in equity and credit markets, another risk comes from BTPs themselves.

Italian lenders hold almost EU350 billion of sovereign bonds, or 10% of their assets in sovereign bonds on average -- that's much higher than Germany's 3.7% and France's 2.2%, according to Bloomberg Intelligence. The banks' low valuation compared with European peers may not yet be attractive to investors, "given the threat of fiscal easing remains," BI analysts note.

As Chuck Schumer would have said... "Get back to work Mr. Draghi..."