Risk assets suffered a severe setback as a fresh surge in Italian government bond yields triggered fears that the eurozone debt crisis was entering a new and potentially more dangerous phase.

Leading US and European equity indices fell more than 2 per cent, the euro dipped to its lowest level against the dollar for a month and commodity prices sank as investors scrambled for the safety of US and German government debt. Those moves came as the yield on Italy’s 10-year bond soared way above 7 per cent, a level widely perceived as unsustainable and well on the way to points that have triggered previous bail-outs.

“Greece, Ireland and Portugal were each bailed out 18 days, 15 days and 55 days after their yields hit 7 per cent respectively,” noted Ashraf Laidi at Intermarket Strategy.