Until this weekend, many investors thought eurozone politics was inevitably messy but no longer had the power to trigger volatile and disorderly markets. Italy has forced a rapid and painful reappraisal.

Those exposed to eurozone markets, and Italy in particular, are nursing big paper losses after near unrelenting selling in bonds and equities since Friday. The shift in markets has been profound, ensnaring the debt of other peripheral countries such as Portugal and hurting banks as investors contemplate the possibility of Italy’s political turbulence escalating into another eurozone crisis.

The scale of the moves in Italian debt has stunned some. Italy’s two-year government bond price has plunged over the past three trading days, sending its yield soaring from 0.27 per cent to as high as 2.72 per cent yesterday. The 10-year bond yield has jumped from 2.4 per cent to a high of 3.39 per cent in the same period.