…the contagion into core banks may be being underestimated by investors. Moody’s on Tuesday said it could downgrade France’s BNP Paribas, SociÃ©tÃ© GÃ©nÃ©rale and CrÃ©dit Agricole due to their holdings of Greek debt, and the ratings firm is looking at whether other banks could face similar risks.
Disturbingly, the worries have now reached non-financial companies, which have been virtually bulletproof this year. Investment-grade bond issuance has come to a near-standstill. The yield premium on Portugal Telecom’s February 2016 euro bond over German Bunds has widened a stunning 2.3 percentage points in the last two weeks, data from SociÃ©tÃ© GÃ©nÃ©rale show. Italian and Spanish credits are under pressure too. The credit market now starts by pricing government risk and then works back to price debt from financials and companies, one investor says: Greece is a destabilizing influence at the center of the market’s deliberations.