Following newly-minted prime minister Giuseppe Conte's first speech, which did nothing to appease Brussels' hopes for normalization, Italian bond yields, spreads, and bank stocks are showing notable signs of stress once again.

Just when you thought it was safe... Conte used the speech to the Senate on Tuesday to promise “a new wind of change” based on a program of fiscal expansion drawn up by the euroskeptic Five Star Movement and League that risks breaching European Union budget rules; reiterating the government’s radical policy program, including a "citizen’s income," (UBI), and tax cuts.

“Eliminating the difference in the economic growth between Italy and the European Union is one of our objectives, which must be pursued within a framework of financial stability and market trust,” said Conte, flanked by Five Star leader Luigi Di Maio and League chief Matteo Salvini. Conte was confident about his government’s “negotiating power,” because Italy’s interests match Europe’s.

As we detailed earlier, defending populism as “the ruling class listening to the people,” Conte promised the citizen’s income for the poor and the jobless, a two-tiered flat tax, and a boost in health spending -- while also promising to reduce the public debt “by making our wealth grow, not through austerity measures.”

Conte also vowed “revolutionary measures” to overhaul the tax system, to review bankruptcy laws, crack down on big companies “hiding their wealth in artificial havens” and cut the perks of politicians.

Sending Italian bond yields and risk, relative to Bunds, surging... that is a 25bps spike today - it just looks modest due to last week's chaos.

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And as goes bonds, so go Italian banks...

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“Some may have hoped for some watering down after the market moves we saw last week,” said Jan von Gerich, chief strategist at Nordea Bank AB. “But Conte talks about revolutionary measures.”

And broadly speaking, European bank stocks are suffering...

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