Back in 2011/2012, EU-related fears had more to do with certain countries being unable to pay their debt and/or general systemic risk relating to Greece being the first domino in the eventual complete collapse of the union. We got past that.
Now the fear has morphed into that of various countries opting to exit the EU (as The UK already did). The focus is currently on Italy in that regard. Yesterday's developments made the risk seem as big as its been--ever, really.
An Italian EU exit would be a big deal and markets treated it accordingly. Today's headlines brought a dose of moderation to the political landscape, with most of the stakeholders apparently interested in avoiding the snap elections that threaten to serve as a referendum on Italy's EU membership.
To whatever extent the majority coalition can get its lawmakers approved by the Italian president and avoid those elections, investors would not need to have so much "panic money" parked in the bond market. When rates were their lowest yesterday, a conciliatory meeting didn't look to be in the cards. But after it happened today, rates went immediately higher. Little to no attention was paid to domestic economic data (or anything else for that matter)--at least not as far as bond markets were concerned.
10yr yields ended the day 6.7bps higher at 2.857--still very much below last week's latest levels just over 2.92%. In other words, today was only bad in relation to yesterday. Otherwise, it's fair to say that bonds are still having a stellar week. It remains to be seen if that will continue to be the case. At the very least, ongoing bridge-building between Italian politicians could continue to put upward pressure on rates.