For the second day in a row, the "weakest link" among G-10 bond markets, Italy, is getting hit hard, with the 10Y Italy government bond sliding, sending its yield to session highs of 3.24%, which also is above the highest yield hit during the May mini-crisis, is now the highest going back to 2014.

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"Lo spread" is similarly getting blown up, with the 10Y Italy-German spread now the widest since 2013...

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... meanwhile, the short-end is also moving higher, flattening the curve sharply.

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The move has erased earlier gains, after reports in the Italian media that Finance Minister Tria is seeking a deficit/GDP ratio of 1.5% in the new budget law, well below the 3% feared by investors.

However, this favorable take was quickly erased following the latest blow out in emerging market bonds, where Argentina bonds took the lead and are being dumped en masse, and contagion is once again starting to emerge. And while US equities remains in a range, the move higher in Italy is being noticed by US Treasurys, whose yields are now down to session lows, just above 2.83%.