Once again, it’s the PIIGS. For the past year, the focus on eurozone’s debt crisis has been on the PIGS — Portugal, Ireland and especially Greece, plus Spain. But the crash in Italy’s bonds has put the second I back in that acronym.

Global markets shuddered in reaction because, in the words of Goldman Sachs Asset Management head Jim O’Neill, “neither the euro area nor possibly the rest of the world can afford a full-blown Italian bond crisis.”

Or as Nomura Securities foreign exchange strategist Jens Nordvig pithily asserts: Italy is too big to bail.

The slide in the prices of Italian government bonds intensified Monday, sending the yield on the 10-year maturating to the highest level since the introduction of the euro in 1999, to 5.75% — -twice the yield on benchmark German bunds. At the same time, prices of Italian bank stocks continued to tumble, sending the iShares MSCI Italy Index exchange-traded fund (ticker: EWI) down over 6% Monday. Since the beginning of May, the U.S.-traded Italy ETF is down 23%, a full-fledged bear market by the popular criterion of a 20% fall.

via Italy’s Burgeoning Debt Crisis Hits Markets Around the Globe – Barrons.com.