Instant View: Moody's cuts Greece to junk status

NEW YORK (Reuters) - Moody's Investors Service on Monday downgraded Greece government bond ratings into junk territory, citing the risks in the euro zone/IMF rescue package for the debt-laden country.

KEY POINTS:

* The agency downgraded the rating by four notches to Ba1, placing it one notch into junk status. The outlook is stable.

* Moody's also downgraded Greece's short-term issuer rating to not-prime from Prime-1.

* The rescue package "effectively eliminates any near-term risk of a liquidity-driven default and encourages the implementation of a credible, feasible, and incentive-compatible set of structural reforms, which have a high likelihood of stabilizing debt service requirements at manageable levels," said Moody's senior analyst Sarah Carlson.

COMMENTS:

KARL MILLS, PRESIDENT, JURIKA, MILLS & KEIFER INVESTMENT PARTNERS, OAKLAND, CALIFORNIA:

"On one hand I guess it shouldn't be a surprise. Funny how these stories come out right as the market is running up against resistance, the moving average. So anybody who hasn't downgraded Greece already in their own minds, I'm not sure what they are waiting for. It reminds you that the debt issues are there, they are real. Spain is a bigger concern for most people than Greece. It will be an interesting summer.

"The bigger frontier is Spain, that is a much larger moving part in Europe. You have this tug of war happening between current fundamentals, which are good. And the current debt problems, which are bad, and the discounting of what these debt problems might mean for future fundamentals, which are probably less good and potentially bad. It's reinforcing a skittish sense about the market, we've come off a long way in a short period of time, so technically the market should be oversold. There are a number of very cheap stocks out there that are probably discounting a lot of bad news, but one should tread carefully. Focus on high quality companies at cheap prices. But we wouldn't be 'all in' by any stretch of the imagination."

MARTY MITCHELL, CHIEF MARKET TECHNICIAN, STIFEL NICOLAUS, BALTIMORE:

"First of all, it's news that had been anticipated, so it's not anything earth-shattering. To the extent that the equity market will turn a little bit lower on that news the Treasury market could see a bit of a bid, but both markets seem to be ignoring it at the moment."

RICHARD FRANULOVICH, SENIOR CURRENCY STRATEGIST, WESTPAC, NEW YORK:

"The market took this report negatively. But I am not really surprised because even absent the ratings agency action, Greece's paper is worthless except for that fact that the European Central Bank is buying it. Overall, this is an excuse for the euro to pull back. We have had a good rally in the euro since last week so this news moves the currency into further consolidation. We may fall into the $1.22 area but the rally in the euro still has some legs and I see it rising to $1.24 to $1.25."

RYAN DETRICK, SENIOR TECHNICAL STRATEGIST, SCHAEFFER'S INVESTMENT RESEARCH, CINCINNATI, OHIO:

"At this moment, the market is actually taking it in stride after dropping initially. It's not too much of a shock with so much of the negativity with Greece already baked into the market. Maybe if you are talking about another country like Spain, it might have been different."

STEVE CLAUSSEN, CHIEF INVESTMENT STRATEGIST AT OPTIONSHOUSE.COM:

"Some futures sold off after Moody's downgrade on Greece but this was a brief knee jerk reaction. It was pretty much expected, at least to options traders, and it has been relatively priced in the options market. This is not changing the overall scope of trading."

PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO IN NEW YORK:

"Well behind the curve, Moody's downgrades Greece's credit rating to Ba1 from A3, now junk status. The timeliness of the call is worthless though as S&P downgraded them to junk back on April 27th. Also back in early May, the ECB said they would accept Greek debt collateral for repo even as a junk credit after originally saying they would only accept investment grade. Fitch currently has Greece at BBB-."

MARKET REACTION:

STOCKS: U.S. stock index futures were little changed.

BONDS: U.S. Treasury debt prices were slightly higher.

DOLLAR: U.S. dollar rose against the euro.