This article was written by Tyler Durden and originally published at Zero Hedge.

Editor’s Comment: There are signs that a whole new banking crisis is following the tremors resulting from the Brexit vote – which have already been enough to initiate panicked trading and wide currency swings. What is happening in Italy is true of all the same pressure points in Europe that have come to the brink of disaster. Will this time be enough to drag the stability of the global economy along with it?

How much it impact it ultimately has remains to be seen.

“We’ve Never Had A Shock To The System Like This” – Global Selloff Accelerates On Brexit, Italy, “Unknown” Fears

by Tyler Durden

The flight to safety following last week’s quarter-end window dressing is accelerating, with constant news and flashing red headlines of record low yields across DM government bonds once the norm, and as of moments ago Denmark’s 10Y bonds joined the exclusive club of sub-zero yields; gold has soared to fresh multi-year highs above $1,370, the risk-off currency, the Yen, soaring and sending the USDJPY just above 100, while sterling crashed overnight once again below 1.27, levels not seen since 1985.

European banks continue to struggle and while Monte Paschi was halted up 10% earlier following the previously halted shorting ban, both Deutsche Bank and Credit Suisse have plunged to new all time lows, this time on concerns that the two trouble banks could be forced out of the Stoxx 50 Europe index according to an LBBW analysis while BlackRock cutting the region’s shares to underweight, with a negative view on the euro area’s banking sector, did not help. To be sure, all eyes remain on both Italian banks as well as UK property funds, where the announcement of more gating is widely perceived as imminent.

Indeed, as Bloomberg summarizes, it’s safety first for investors around the world as Brexit, no longer a risk on catalyst as it was a week ago, has instead become a reason to offload risk.  Demand for haven assets sent bond yields to record lows after Federal Reserve Bank of New York President William Dudley said Brexit’s significance could escalate if it triggers turmoil in markets beyond the U.K.

Based on overnight analyst quotes, the euphoria is certainly gone by now: “Everyone is trying to react to a situation we’ve never been in before,” said Stewart Richardson, chief investment officer at RMG Wealth Management in London. “We’ve had shocks to the system before, but we haven’t had one like this. And we won’t know the answers for a long time.”

Mitsuo Shimizu, deputy general manager with Japan Asia Securities, also opined saying that there are “fears the global economy will worsen due to Europe. The U.K.’s economic outlook is blurred with uncertainty and the pound’s recent weakness is likely to encourage speculative buying in the yen.”

After rallying last week on bets central banks will work to limit the fallout from Britain’s referendum, global equities are retreating again as the knock-on effects become evident and as central bank credibility and efficiency is once again questioned. Three asset managers froze withdrawals from U.K. real-estate funds on Tuesday following a flurry of redemptions and the Bank of England relaxed capital requirements for lenders. Societe Generale SA Chairman Lorenzo Bini Smaghi said a banking crisis in Italy, stoked by the referendum, could spread to the rest of Europe and rules limiting state aid to lenders should be reconsidered.

As noted earlier, yields continue to plunge: 10-year US Treasury yields fell as much as six basis points to 1.318% and was at 1.33% at 10:44 a.m. London time. Yields on 10-year government bonds in Australia, Japan, Germany, France and the U.K. also sank to records. The strength of the gains in government bonds is leaving investors to ponder how severe the fallout from Brexit is going to be. Securities in the Bloomberg Global Developed Sovereign Bond Index, with an average life of about 10 years, yield a record-low 0.40 percent. In Germany, the 10-year bund yield fell to minus 0.205 percent, while yields on similar-maturity French and British securities reached 0.101 percent and 0.729 percent, respectively.

Expect yields to continue plunging: declining prospects of a Fed rate hike have spurred a torrent of demand for Treasuries, with almost $10 trillion of securities in the Bloomberg Global Developed Sovereign Bond Index yielding less than zero, up from about $9 trillion a week ago. In addition to experimenting with negative rates, some monetary authorities abroad are buying government debt, reducing the supply for investors who count on fixed-income assets.

“In the risk-off environment produced by international events, there is a global rush to buy super-long sovereign debt, and bonds that still offer some yield are going to be most in demand,” said Hideo Suzuki, the chief manager of foreign exchange and financial products trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo.

And while until recently bonds and stocks had disconnected, as of this moment, plunging yields finally means sliding stocks as well. The MSCI All-Country World Index dropped 0.7% and the Stoxx Europe 600 Index slid 1.4 percent, falling for a third day, with all its industry groups declining. Automakers and insurers were the biggest losers, while Tullow Oil Plc sank 14 percent after announcing a $300 million sale of convertible bonds. The Stoxx 600 trades at around 14 times estimated earnings, near its lowest valuation since 2012 relative to the global index.

Deutsche Bank AG led losses in a gauge of European lenders as BlackRock Inc. cut the region’s shares to underweight, with a negative view on the euro area’s banking sector, amid the Brexit fallout. The Italian market regulator banned short selling on Banca Monte dei Paschi di Siena for Wednesday’s session, prompting a rally of 9 percent — after it slumped 31 percent in the past two days. The MSCI Emerging Market Index dropped 1.4 percent, falling for a second day. Shares in South Korea slid 1.9 percent and Taiwan’s benchmark slid 1.6 percent. Many markets across Asia and the Middle East were closed for religious holidays.

Finally, the US:

• S&P FUTURES NEAR SESSION LOW, -14PTS, AS EU STOCKS EXTEND DROP

At this rate the Fed’s biggest flip-flopper and stock market supporter, Jim Bullard, may want to wake up: the futures will need his jawboning support soon.

Read more at Zero Hedge.com, where this report was first published.