Two Additional Points About Greece

First, note that Moody's rating for Greece is A3, which is the same as A-. As long as one rating agency has Greece BBB- or above, the ECB will still allow its use as collateral. Of course the S&P aggressive move is significant and cannot be for European banks, who hold Greek bond, including Greek banks themselves, but Greece is thus far not cut off from the ECB.

Second, S&P assigned a recovery rating of 4 to Greek debt issues. This means that S&P expects on average that debt holders may get only 30-50% of their investment back in the event of a debt restructuring or payment default.

The euro has been hit hard today. A big outside down day (trading on both sides of yesterday's range and most likely closing below yesterday's low near $1.3292. The low for the year was set last Friday just ahead of $1.32. Below here the next big level is $1.30.

The dollar-bloc, emerging markets and equities are under strong pressure. Unwindings of these positions may be helping the yen. The dollar may find some support in the JPY92.40-60 area. The safe haven flows are lift US Treasury prices, with the 10-year yield